Also known as ABL, an asset-based lending is a popular type of business loan taken out typically by small to medium sized enterprises. These loans might seem expensive as compared to traditional bank loans, but they’re highly flexible, easy to pay off, and customizable.
An ABL is a perfect choice for business owners looking to expand and accelerate their business’s growth, reach, and financial capital. These loans are structured similar to a revolving line of credit that allows borrower to put in their tangible assets as a continuing bottom to meet capital or operating expenses.
Many conventional lenders such as banks and credit unions have made their criteria for ABL borrowers quite stringent and difficult to meet. And that’s where hard money lenders in DesMoines such as GCP Fund come into play. GCP Fund not only allows lenders to jump through the proverbial hoops of lending difficulties, but also avoid eleventh hour loan rejection.
Now that you’re brushed up on the basics of an asset-based loan, let’s dig deeper to learn its uses and applications.
1. Avoid Strict Guidelines
Small to medium sized enterprises usually have non-liquid assets. They’re yet to break into the market and make profitable sales, and this makes them less likely to qualify for a traditional bank loan.
Enter: Asset-based loans
ABL is perfect choice for business owners who need funding to operate their firms but don’t meet stringent guidelines. This affects their loan application negatively.
Using a revolving line of credit such as in an ABL, business owners can put their accounts receivables, machinery, or a building as collateral without de-liquefying cash flows.
2. Expand Capital Expenditure
ABL also help borrowers acquire another business or merge with one. These loans offer a lucrative opportunity to minimize lending risks and maximize business potential. Moreover, by taking out an asset-based loan, you can limit customer’s loss and keep your company’s stock from falling. The latter is common during the pre and post-merger periods.
ABL can help you maintain an above-the-level stock price and minimize the impact on your investors who might back-off in case of a mishap.
3. Periodic or Recurring Financing
Businesses in Des Moines that rely on making profits during seasonal demand spike and periodic sales can use an asset based loan to their maximum advantage. Such businesses face an inevitable loss during off-seasons, and therefore, require a monetary cushion to stay afloat in the market.
By taking out an asset based loan in Des Moines, business owners can:
- Pay operational expenses such as utility bills and maintenance costs
- Perform payroll functions
- Pay supply vendors on time
- Use their off-season period to improve and enhance business offerings and customer experience
Assets Used as Collateral in an Asset-Based Lending in Des Moines
Accounts receivables are most widely accepted collateral in exchange for an asset based loan. A/R tops the list containing other options such as machinery and equipment due to its low-risk nature.
Generally, asset based financing is offered to SMEs with a stable sales revenue. Moreover, to qualify for asset based lending in Des Moines, the borrowing business must also be clear of any serious financial, tax, or legal issue.
Interested in Hiring an Asset Based Hard Money Lenderin Des Moines, IA?
GCP Fund offers flexible asset-based lending solutions in Kansas City, Grand Rapids, St Louis, Des Moines, and several other areas. They help you carry out capital improvement and business expansion projects without diving into high risk loan schemes.