Asset-Based Lending in New York: What are the Upsides and Downsides?

A man is viewing a business report on his tablet
 

While exploring the commercial financing options for your business, you must've considered asset-based lending. Asset-based loans require you to pledge your assets, such as inventory, market securities, property, etc., as collateral for the loan. This helps secure large working capital in a shorter time, with competitive interest rates.

 

However, there are some downsides that you should know before applying for it. Here are the upsides and downsides to asset-based lending:

 

Advantages of Asset-Based Lending

  • The most obvious upside of asset-based lending is the ease of obtaining it. Unlike traditional loans, asset-based loans are approved quicker with fewer hassles and offer a reliable working capital source
  • Asset-based loans may charge lower interest rates because they are less risky than traditional loans. These loans are secured by your assets, making them safer than unsecured loans. Also, if your assets have high liquidity, you may get an even lower interest rate.
  • You have more flexibility with how you spend the money from asset-based loans. They are not locked for a specified purpose, and you can use them for any business activity. Moreover, you may also have flexible repayment options if you use highly liquid assets like accounts receivable or stocks for the loan.

 

Disadvantages of Asset-Based Lending

  • We mentioned that asset-based loans are safer than traditional loans, but for the lenders. It's the opposite for borrowers because they risk losing their assets placed as collateral. Failure to pay back the loan amount can result in having to forfeit assets like property, inventory, machinery, etc.
  • If a company owes a larger amount as a loan than its assets' value pledged as collateral, it can over-mortgage its loans. The company will lose more money than it did before getting the loan.
  • Asset-based lending has borrowing limits. Since the loan amount depends on the value of your lent assets (Loan to value ratio/LVR), it may not be enough to fulfill your business requirements. However, it rarely happens because most companies have high-value assets that help them secure more working capital than traditional loans. 

A man is using a laptop

Besides these disadvantages, there can be many more risks if you don't choose a reliable commercial lender. Global Capital Partners Fund has reputable hard money lenders who offer their services across various states, including New York, Michigan, Virginia, etc. Visit their website to learn about their financial financing programs or contact them today.

Comments

Post a Comment

Popular posts from this blog

3 Things To Consider When Applying For Private Lending

Image
  Whether you want to  invest in commercial real estate  or acquire a business, sorting out a suitable funding option is a must. Many business owners consider private lending to finance various projects. But with several money lenders in the market, it can be difficult to identify the best deal. Hence, we have compiled a list of the top three things to consider before applying for private lending. Global Capital Partners Fund is a reputable private lending organization that offers various financial solutions to businesses in Tenessee , Washington , Virginia , and many other states in America. The company is popular for asset-based lending , bridge financing , mortgage lending , and many other affordable financing options. Make sure to keep these top three things in mind while applying for private lending. 1.   Know The Interest Fees And Rate Private lenders typically charge higher interest rates than traditional lenders such as banks, so it's important to carefully r...
Read more

How Can Bridge Financing Help Your Business in Annapolis, MD?

Image
  A bridge loan  is a short-term financing option that helps businesses meet their immediate obligations before they secure a long-term finance facility. It is widely used by companies in the commercial real estate sector, where they need quick cash to take advantage of a lucrative real estate investment opportunity. Here's how you can use bridge loan financing  as a short-term financing solution for your business in Annapolis, MD.   Purchase Real Estate If you're looking to grow your business and want to purchase a new facility, bridge loan financing can provide you with the necessary financial impetus to help you with your purchase. Conventional financial institutions and banks have strict lending requirements for funding commercial real estate. They will conduct a comprehensive review of your financials, conduct property appraisals and inspections, and then provide you with approval.    Time is of the essence when securing a viable commercial space, and...
Read more

5 Real Estate Investment Challenges and How to Deal with them

Image
  Real estate investment involves the process of buying a property and then renting it out to generate income. The major concern during this process is the amount of money required for a particular property. This guide will discuss common challenges investors face in the real estate industry and how a lending company can help. Market Volatility A challenge that real estate investors commonly face is market volatility. Despite the tremendous real estate opportunities , uncertainty in the market due to multiple reasons makes the situation difficult for investors. However, this issue can be addressed depending on the investor’s strategy. For instance, they can opt for a stable investment opportunity rather than jumping into uncertain situations. Property Valuation Decision analytics before investing in real estate offers a comprehensive report, answering the investor’s queries and analyzing the potential risks. Poor property valuation prevents investors from ...
Read more