When you’re trying to get your hands on some cash, you need to be fully aware of the different types of loans available to you.

Two of the main types of loans include cash flow lending and asset-based lending.

Understanding these differences will help you hone your approach and will inform how you apply. Use the tips below so that you can decide on the type of loan that works for you.

Cash Flow Lending vs. Asset-Based Lending: The Basics

The first thing you need to do is get a basic understanding of cash flow lending vs. asset-based lending.

Knowing these different forms of lending will be essential, whether you need to get a loan to open a new restaurant or to buy a house.

With a cash flow loan, the decision is based strictly on the performance and expected performance of your business. Think about this as similar to how you’ll need to be vetted before a lender will give you money for a car loan.

With asset-based loans, the loan is based on your company’s liquid value.

Figuring Out Which is Best For Your Business

You need to take a detailed approach when it comes to determining which loan is right for you. Consider these points so you get a clear understanding of the differences:

1. Cash Flow Lending Takes Your Past and Future Into Account

Lenders will take a detailed look at how your company has performed in the past, and how it is expected to perform in the future. They will take into account things like your credit rating, the current market, and your company’s profit margins.

These metrics have also evolved to accommodate today’s way of doing business. For example, lenders are making decisions on loans based on metrics like Amazon sales data and visibility.

2. Cash Flow Lending is Quicker

When you need your money quicker, cash flow lending is the way to go. It’s much easier to get an account of your company’s performance than it is to appraise all of the assets you are putting up.

You can expect to get a decision in as little as a few minutes or upwards of a few days.

3. Asset-Based Lending Requires Collateral

If you’re seeking an asset-based loan, you’ll need to have some collateral. This will be the deciding factor in how much money you’ll receive, what types of interest rates you’ll incur, and other terms.

When deciding on the type of collateral you used, it’s important to figure out whether you want a short-term loan or a long-term loan.

4. Asset-Based Lending Gives You a Revolving Line of Credit

Having a revolving line of credit is a valuable tool when you run a business. It can help you out when you’re in a tight pinch and gives you a resource to draw from whenever you need it.

If this is what you’re in need of, asset-based lending is the way to go.

Figure Out the Type of Lending That is Best For You

Whether you decide to get cash flow lending or asset-based lending, it’s important to use some discretion in your decision-making. Consider these differences when you’re trying to get the financing that you need.

At Deal Struck, we’re happy to offer you the lending help you need.

Reach out to us to get a free e-book, and apply for a loan that can help your finances.