How To Choose an Asset-Based Lender
Business remains the same but the ways to finance business have expanded and changed recently. There are more options for infusing your business with cash than ever before. If you’ve been interested in finding alternate financing to a traditional loan, one option is asset-based financing. Read on to learn more about this type of funding and how to choose the best lender for your needs.
What Is Asset-Based Lending?
Asset-based lending is a loan that will have to be repaid, but there’s where all likeness to a traditional business loan ends. These short-term loans can be as quick as six months but rarely go longer than five years. While your physical assets like equipment and real estate can be included in the collateral for asset-based lending, many times it is limited to open invoices and sometimes inventory. The limits on these loans mean you can’t borrow more than what you have on hand, making it a safer bet for your business.
How Does It Work?
Choosing the best lender for you means doing a lot of homework on the details of asset-based lending. Check out reputable websites, which aren’t selling you anything, to learn more. Check YouTube and look for more educational opportunities in your area. See if the SBA and your local branch of the Small Business Development Center have seminars or conferences where you can ask questions after the presentation. Read some books from your local library on the subject to be able to formulate the questions that are most important to your situation.
How Do You Choose a Lender?
Once you have all the details it’s time to choose a lender. Now that you know the ins and outs of asset-based lending you are in a stronger position to determine the best fit for your business. Request quotes from several companies comparing interest rates and other fees. Ask for a copy of their boilerplate contract. Look for the fine print to see if there are hidden fees. If you aren’t comfortable reading contracts, work with an attorney. Also, ask for references and remember to verify them. Finally, ask about their support hours and background for their service representatives. Will someone familiar with your business be able to help when you need it? Once you’ve made all these comparisons you’ll be ready to make your choice.
Borrowing money for your business is an important decision. Make sure to learn as much about the process and the lenders before you enter an agreement that can affect your future.