A Detailed Look at Collateral in Asset Based Lending
As Texas begins to reopen, many businesses find themselves in need of faster cash than a personal loan can offer. Aside from that, not everyone is in the creditworthy position of taking out a loan. Fortunately, with asset-based lending, all a business really needs to obtain a sustainable, revolving line of credit is a few moments for an application and the right collateral on-hand.
Here’s an inside look at the purpose of collateral in an asset-based lending situation and what types of collateral we value at Goodman Capital Finance.
What is Collateral Used For?
Even though creditworthiness isn’t the first thing on our minds, there still needs to be a sense of security within any financial agreement. Collateral is an asset a lender accepts on a loan that can be seized should the borrower default on their payments.
Different Types of Collateral
For asset-based lending, there are several types of collateral we’ll accept. Here are our most widely accepted forms of collateral and why we value them as assets:
Your AR is the collateral that we are going to prefer. We’ll be happy to take a look at your invoices and easily determine the maximum amount we can advance you based on this collateral.
The best part about this is that your credit isn’t what we are examining; it’s the credit of your customers. Another benefit of using accounts receivable as collateral is that as invoices are paid and new invoices are issued, your credit becomes a revolving, flexible option that keeps your business well-funded.
Your equipment, or fixed assets, are also parts of your business that can be offered up as collateral for an asset-based loan. Keep in mind that with equipment as collateral, the loan will be fixed based on the current value of the equipment. It will not revolve like a loan based in AR.
Examples of fixed assets that can be used as collateral include:
- Large Equipment
Although this isn’t a piece of collateral that is usually sought after, sometimes a business owner seeking a loan may put their real estate or business property on the line. In these instances, the real estate should be formally appraised by a third party before approaching your preferred alternative lending company.
An asset-based loan that uses real estate as collateral will usually payout on the higher end, but, like equipment, will be a fixed-term loan.
Inventory is another asset that lenders like to work with on these specific loans. The value of inventory is simple to assess, and it’s the easiest asset to unload if default becomes an issue. While it’s a favorable asset as collateral, the average advance for current inventory is on the lower end. However, the amount of your loan with inventory as collateral all depends on:
- How much inventory you currently have
- What your inventory is
- Your lender’s approach to inventory as collateral
How Can Asset Based Lending Help Your Business?
Asset-based lending is helpful for any growing business because it’s a great way to increase cash flow without taking on unnecessary debt. Get the cash that your business needs to open back up properly through the fast funding and maximum advanced rates through Goodman Capital Finance.
We can help your business manage:
- New marketing opportunities
- New equipment, and more!
Get Your Business Financed With Goodman Capital Finance
We’re ready to help your business flourish in the ways it was meant to. Contact Goodman Capital Finance today to learn more about our asset-based financing and invoice factoring services. Let us help you get the cash you need for growth today!