Not yet registered? Create a OverBlog!

Create my blog

All about asset based lenders

Large corporations and businesses often require both large and small amounts of capital during the initial period of starting their business venture. They also require short-term financing to consistently maintain production in order to meet demand, buy equipment or to increase the inventory. Asset-based lending is one such source of financing or loan offered against an asset, akin to a secured loan. This article provides detailed information about asset-based lending.

Sources of finance

Many banks and financial institutions provide all types of secured and unsecured loans, asset loans, working capital loans, factoring and asset-based loans. Asset-based loans
In financing a business, when a company pledges its assets to secure a loan from banks or financial institutions, it is referred to as asset-based loans. Companies with a not-so-perfect credit score opt for asset-based loans at a slightly higher rate of interest than traditional bank loans. The credit records are indicators that a company can qualify for asset-based loans. Common collateral, or "assets" are accounts receivable, inventory etc. against which loans are available. Commercial lending
Commercial funding is the process of loaning money to established entities like a business or partnership. Unlike traditional loan arrangements offered by banks, commercial funding focuses on the cash flow position of the business first. Commercial lending also comprises of a revolving form of credit to handle operational costs and working capital needs. Factoring finance
Fast-growing companies with bad credit scores can procure financing easily through factoring. You sell your accounts receivables to a factoring company for cash. However, this type of financing increases the cost of financing, thereby cutting into the company's profits.

Advantages of asset-based financing

Accessibility
Companies who do not have collateral assets to procure secured loans, can avail asset based loans easily. This makes financing easier and more accessible for small companies who have just begun and require short-term financing for operational costs and working capital requirements. Lower rate of interest
As compared to unsecured loans, the rate of interest on asset based loans are lower. The interest rates are lower as the lender can recoup his money by seizing the assets of the defaulter. As there is a safety net, the risk is lower and hence, the interest rate is lower. Provides more liquidity and flexibility
Asset based funding focuses on collateral and liquidity. As there are less financial agreements, the company is able to increase its liquidity while having the flexibility to invest in the growth and development of the company with sufficient sources of short-term financing. Final word Asset based financing is ideal for start ups and small businesses who are cash-strapped and do not have a very strong credit standing. They are more versatile, cost effective and flexible

Same category articles Banking

Interest rate history for the UK

Interest rate history for the UK

Getting to know the bank interest rate history for the UK isn't necessary for those looking for home mortgages. However, it helps, especially with variable mortgages and for deciding whether fixed loan rates being offered are fair. It's not everyday that one goes around to mortgage finance companies for a loan to buy a house. So, do some research and get to know the best mortgages that lending firms can offer.
Where to find a premium bond checker

Where to find a premium bond checker

The NS & I Premium Savings Bonds have become popular over recent years. This is because the interest rates on savings accounts have plummeted and stocks, and shares have become increasingly volatile. Premium Bond holders are entered into a monthly prize-draw to win a cash prizes, including a million-pound first prize. This article explains where to find a premium bond checker.
A guide to EMC Mortgage Corporation

A guide to EMC Mortgage Corporation

EMC Mortgage Corporation, based in Lewisville, Texas, is a mortgage banking company that specialises in residential mortgage loans. It is a trademark of JP Morgan Chase & Co. The JP Morgan Chase Bank , N.A., actually services loans under the EMC Mortgage title. Its mission is to provide competitive pricing to borrowers and efficient portfolio management to investors.
An introduction to SBI Mutual Funds

An introduction to SBI Mutual Funds

SBI Mutual Funds are an Indian-based mutual fund. In operation since 1977, the SBI fund is one of India’s premier investment products. With a network of over 200 points of acceptance throughout India, this fund has very good national coverage, and is well worth considering as a potential investment vehicle. For more information about this fund, read this article.