As a business owner, you will probably need to take out a loan at some point to give you the capital you need for any major expense you may face. One such loan you could take out is an asset-based loan. What is this loan and how can it help you? Read on to find out more.
What is an Asset Based Loan?
An asset-based loan is a loan which uses collateral in the form of the assets of your business. This could include your equipment such as computers or technical machinery or your inventory such as office supplies and any products you make. It could also be your accounts receivable.
Asset based loans are frequently used by companies which need capital to grow but are unable to do so because their money is tied up elsewhere. If you have undergone rapid growth recently, you may have noticed that you do not have enough money to meet some of your needs. An asset-based loan can help with this.
Let’s Talk Numbers
One of the most important things to know when applying for an asset-based loan is how much you are going to receive and how much you are going to need to pay back in interest.
This amount typically comes in at about 75% of your accounts receivable or up to 50% of your inventory and equipment. With this, you should be able to cover every cost you need. In terms of interest, this will ultimately depend on your lender, but you can expect rates starting from 7% APR.
So, Why Should You Apply for an Asset Based Loan?
There are many advantages to an asset-based loan. First of all, there is that low interest rate. Since you are using your assets as collateral, there is no need for high interest rates.
These types of loans also have some tax benefits. You may be eligible for a deduction to your corporation tax bill if you have taken out an asset-based loan because of capital allowance.
The big advantage of an asset-based loan is its flexibility. You can use the money you get from it to pay for nearly anything so long as it is for your business. One of the primary uses for an asset-based loan is to use it to buy new high-spec equipment. This can cut down on repair and general maintenance fees which can overall save money on your everyday operations.
Another advantage of an asset-based loan is how quickly they can be obtained. It might only be a few weeks before you see money in your account, unlike other commercial loans which have more paperwork and guidelines to fulfil. So long as your business is profitable and financially stable, you are in a great position for an application.
Think It Is the Right Loan for You?
If you think an asset-based loan is precisely what your business needs, speak to a trusted and accredited lender today. They will be able to correctly advise you on what exactly you need to take out your first asset-based loan to help your business reach its full potential.