One of the popular methods of financing that a lot of companies use would be to put their assets as collateral for loan. This is also known as asset based lending ventura county and is a very safe way of loaning money on the part of the lender. It is a win win method wherein the borrower gets the funds right away and the lender will have a valuable collateral in case of no payment.
Now, before discussing how this type of financing works, it is important to first know what assets are eligible to be put up as collaterals. For one, accounts receivable can be used as a safety net in case the borrowing business does not pay the loan. Aside from that, company equipment such as machinery, merchandise, property, or company cars can be used.
Now that one knows the various assets that can be used for the loan, the next thing would be to understand how to value collaterals. For the accounts receivables, the usual practice would be to loan up to eighty five percent of the total accounts receivable amount. As for the inventory or equipment, best practices would be fifty to sixty percent of the fair market value.
Of course, there would also be a cost to the loan. The usual cost of taking this sort of loan would really depend on the lender who is shelling out the money but the usual practice of these lenders are to put the cost at around seven percent. However, some lenders may put the cost at around ten to seventeen percent depending on the risk involved.
Now that one has an idea of the details regarding the loan, the next thing to know would be the process. Before the lender gives out any money, he or she will have to do a full background check by taking a good look at the financial statements and the company status. The next thing that has to be done would be the valuation of all collaterals mentioned to see if they are valuable enough.
When all the background checks are done and all the terms are agreed upon, the money is given. Now, do take note that credit score is not a criteria in lending money. This is because lenders already feel safe even though the borrowers do not pay up since the lenders already have a hold of collaterals that are worth more than the loan itself.
As one can see, it is extremely easy to secure this type of loan, which is why it is popular. As long as the borrower complies with all the background check requests by the lender, then there should be no problem. The lender takes the collateral, and the borrower gets the funds.
Take note that the cost of this loan is quite high compared to conventional loans. However, it is going to be needed if a company has a lot of inventory or equipment but needs more working capital to keep afloat. The best part is that there are no debts involved as actual items are already going to be given up as collateral which makes it safe for lenders.
Now, before discussing how this type of financing works, it is important to first know what assets are eligible to be put up as collaterals. For one, accounts receivable can be used as a safety net in case the borrowing business does not pay the loan. Aside from that, company equipment such as machinery, merchandise, property, or company cars can be used.
Now that one knows the various assets that can be used for the loan, the next thing would be to understand how to value collaterals. For the accounts receivables, the usual practice would be to loan up to eighty five percent of the total accounts receivable amount. As for the inventory or equipment, best practices would be fifty to sixty percent of the fair market value.
Of course, there would also be a cost to the loan. The usual cost of taking this sort of loan would really depend on the lender who is shelling out the money but the usual practice of these lenders are to put the cost at around seven percent. However, some lenders may put the cost at around ten to seventeen percent depending on the risk involved.
Now that one has an idea of the details regarding the loan, the next thing to know would be the process. Before the lender gives out any money, he or she will have to do a full background check by taking a good look at the financial statements and the company status. The next thing that has to be done would be the valuation of all collaterals mentioned to see if they are valuable enough.
When all the background checks are done and all the terms are agreed upon, the money is given. Now, do take note that credit score is not a criteria in lending money. This is because lenders already feel safe even though the borrowers do not pay up since the lenders already have a hold of collaterals that are worth more than the loan itself.
As one can see, it is extremely easy to secure this type of loan, which is why it is popular. As long as the borrower complies with all the background check requests by the lender, then there should be no problem. The lender takes the collateral, and the borrower gets the funds.
Take note that the cost of this loan is quite high compared to conventional loans. However, it is going to be needed if a company has a lot of inventory or equipment but needs more working capital to keep afloat. The best part is that there are no debts involved as actual items are already going to be given up as collateral which makes it safe for lenders.
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For a closer look at the benefits of asset based lending Ventura County customers should turn to our recommended homepage and read all the information at http://www.cornerstonecapitalfinancegroup.com/cashflow.
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