Having a business’ financing solution at the ready will contribute a great deal to the future success and longevity of your business. As a business owner, the last thing you don’t want to contend with is a financial burden such as the repayment of a loan you couldn’t afford in the first place. This kind of financial dead-end can quickly sink your credit rating and destroy your payment history. However, there are other more accommodating solutions at asset-based lending Detroit.
Instead of applying for unsecured loans, you may benefit more by using your existing business assets to secure the funding you need. Here are four common myths surrounding asset-based lending that are debunked.
Myth 1: Asset-based lenders only consider collateral value, nothing else.
While the value of your collateral is a major factor in determining your eligibility, lenders also consider other factors as well. Most asset-based lenders are also concerned with your business’ financial performance when evaluating your application.
Myth 2: Asset-based loans are more expensive than other types of loans.
There are certain asset-based loans that charge high-interest rates, which is why you need to compare your options when you shop for loans. However, asset-based financing is generally affordable and offers flexibility that is equal to an unsecured business loan. Keep in mind though, that the terms and rates set by asset-based lenders may vary depending on the current condition of your business.
Myth 3: Asset-based loans hamper the growth of your business.
Many business owners are of the view that asset-based loans restrict the growth of your business, but this is far from the truth. The whole point of asset-based financing and small business loans, in general, is to help your business grow and expand. It also helps remedy cash flow issues that are common among small businesses. This means you can use the funds from an asset-based loan to add to your working capital, purchase inventory, cover daily business operations, and pay for unexpected expenses.
Myth 4: Asset-based loans don’t offer flexibility of use.
It’s a fact that asset-based loans offer far more flexibility than most traditional loans in the market. With an asset-based loan, the amount of your loan is based on and adjusted to match the value of your collateral. As previously mentioned, business owners can utilize the funds in any way they like, as long as it benefits your business.
It’s a challenge for a small business owner to use funds from a loan for one specific purpose, especially when unforeseen expenses arise. Unless you’re applying for a loan for a specific purpose, (such as equipment or real estate), you need flexibility in the use of your funds to pay for marketing, advertising, making payroll, hiring employees, expanding your customer base, and more. Fortunately, the funds from an asset-based loan allow you to do all that and more.
Myth 5: Asset-based lending only suitable for companies with poor cash flow.
Many people think that asset-based loans are only for companies with cash flow issues. However, this isn’t the case. Companies of all sizes and operational capacity can apply and qualify for asset-based loans.
With unsecured bank financing, you don’t need collateral to secure the loan. This means you need to repay the loan regardless of the financial health of your business. On the other hand, asset-based financing uses your assets to secure the loan. If you’re unable to pay the loan back, it wouldn’t ruin your credit score but lenders will repossess your assets.
Myth 6: Asset-based loans are not for businesses who have been denied bank loans.
Many business owners think that if they can’t qualify for a bank loan, they won’t have a chance qualifying for asset-based loans. Fortunately, this isn’t the case. Even if you’ve been denied bank loans, you can still qualify for asset-based lending and secure the funding you need.
You just need to use the assets your business already owns to secure an asset-based loan. With your assets as collateral, this lowers the lender’s risk. This also lowers the interest rates, making the terms more favorable for you. Even if you didn’t qualify for a bank loan, you can qualify for asset-based financing if you have sufficient business assets.
Asset-Based Lending Detroit: Loans for Your Business
If your business has the right type of assets, you can apply for asset-based lending Detroit with complete confidence. However, you need to make sure that you can repay the loan, otherwise, your assets can get repossessed. If it’s your first time applying for an asset-based lending Detroit, it’s best to talk to a financial advisor. They can walk you through your loan options and they can help determine which financing program is best for your company.