When you look at the many loan applications that many of the small businesses make to the banks, you’ll notice that they get highly rejected and that is why many small businesses fail. Beyond the bank, you can actually improve your odds of getting the money. However, even then, about 60% of the applications are also turned down. It is very heartbreaking especially for the small business owners. The truth is that running a small business or even a startup can be very risky and if you’re not careful, you may never even breakeven. The truth is that you will never be able to pay the loans if you do not have enough financing and that is why, even the banks will not even be interested in helping you. The thing is however you can still be able to get financing if you are open-minded. One of the options that is available for you is known as asset-backed financing, it is a good option because of the advantages you’ll be able to get. The importance of asset-backed financing cannot be overemphasized, this article is going to explain more on the same.
When you decide to use asset-backed financing, you are simply saying that you are going to use your company assets as collateral to get the financing you need. Because you have used the company assets, the company is definitely going to lose especially because the loan or the bank is going to take over because that is the collateral that was given. The interesting thing is that asset-backed financing is going to work many of the times especially because you have real proof that you have real value. In order to have better understanding, you will need some perspective on what you can put up as collateral. You have to consider putting up equipment as collateral, that is considered to be very important. If you are running a commercial bakery for example, you can use the equipment as collateral and you could also use company vehicles. Another option that is available would be to give invoices and also, the outstanding payments that have to be done by customers.
One of the pieces of information that you need is the borrowing base and their bank uses this information to ensure that you’re able to know how much money you can get. If an asset is not very easy to bring into cash, you’ll notice that the company is not going to be willing to give you so much. It is however important to realize that asset-backed financing is very good especially if this is something you’re focusing on to grow your business.