As a small business owner, there may be times when you find yourself in financial trouble. You may have an unexpected emergency or receive a large order without the inventory to fill it. However, did you know that both your liquid and fixed assets can be used as leverage for asset-based lending? These are ways to use this type of lending.
Learn About the Process
Before you ever pursue an asset-based lending strategy, you should learn everything you can about the process. Therefore, search for books and other resources on this financing option. You can also attend conferences or learn from other business owners you know who have participated in this process. Lending institution representatives can also answer your questions.
Investigate Possible Lenders
If you are going to pursue this type of lending, you need to do your due diligence with regard to lenders. Each lender will have its own fees, interest rates and loan conditions. Therefore, you need multiple quotes from different lenders. You should also discuss the fee structure of each loan and ask about any undisclosed charges you may encounter, such as late payment or early termination fees.
Ask the lenders if they have experience working with your type of business. Your industry may have nuances that the lender may be unfamiliar with if they haven’t worked with other businesses like yours. You should also ask how long the lender has been in operation.
You should also ask your lender for references you can check. Learn about other business owners’ experiences with each lender you are considering. Ask about their customer service and all the ways these lenders supported their previous and current clients.
Learn To Value Your Assets
The amount of money you can gain through this lending practice is entirely based on the value of your assets. Your current assets are considered liquid because they can quickly be converted into cash. Every time you increase your inventory or accounts receivable, your current assets increase. Your fixed assets are those that cannot be quickly converted into cash. These include real estate and equipment. To gain the most financing through this lending process, you need to understand the value of your current and fixed assets. Although your current asset value can change quickly, you should have a general idea of this value.
Asset-based lending may be a valuable opportunity for you to gain cash for emergencies or growth opportunities. Do your research to find the best ways to use this funding option.