How can you qualify for an asset based loan?

Published On December 26, 2017 | By William Thomas | Business

A large section of small and mid-sized companies seeks asset-based loans from the financiers to ease up the cash flow in their business. Unlike the institutional lenders and banks, these are short-term loans, although the rates of interest are high. However, you can easily qualify for these loans. When you approach the banks, they examine the track record and assets of your company before sanctioning the loan. However, the private lenders like do not require the business firms to have an impressive track record. You may approach reputed companies like USFS Corp for asset based lending. These loans are provided on the basis of their asset, equipment and inventory. These assets vary from one company to another, depending on its nature, and may include:

  • Inventory
  • Real estate
  • Equipment
  • Accounts receivable
  • Materials

Qualifying for the loan

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Although asset based loans are easier to obtain than traditional loans, you need to fulfil certain basic criteria. The most important aspect is, you need to have assets, that can serve as a security for the loan. Certain assets carry more value than the others. For instance, accounts receivable are considered as a good security for asset-based loans. The reasons are:

  • A stated and clear value is provided in the invoice
  • The waiting time for converting invoices to cash are short
  • Once the customer makes the payment, they are easily encashed

However, business firms may have certain assets, which may not serve as a good security. It is difficult to obtain asset based loans based on these. These products include:

  • Damaged inventory
  • Unfinished products
  • Intellectual property
  • Past-due accounts

However, business firms can still qualify for asset based loans with these assets. The value of these assets is less and you will not be able to get high value loans with these. Get across to and have a word with the lenders regarding your requirements.

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