As a business owner, you’ve likely already encountered some of the most common financial problems.
But while you’ve been able to solve most of them after a few months in the past, this time, it’s quite different.
You’re in trouble, you need cash now, and you’re ready to apply for a loan.
But should you go with a traditional business loan, or is an asset-based loan a better choice for your company?
You don’t want to end up in even more financial trouble because you made the wrong choice about the type of loan to apply for.
Keep on reading this post to find out.
1. Asset-Based Lending Is Based on Collateral
Perhaps the biggest difference between an asset-based loan and a traditional business lending is how the loan amount is determined.
In a traditional loan, your lenders will look at your current customer base, your past profits, and your projections for future growth.
However, the amount of an asset-based line of credit is based on the value of the collateral you put up against the loan — AKA, your company’s assets.
These assets include things like equipment, your accounts receivable, any properties you own, and more.
2. Your Personal Financial Background Isn’t as Important
Especially if you don’t have the, you’ll likely be believed to know that, unlike traditional bank loans, ABL lenders don’t base your loan approval on your financial history.
Instead, the decision about the loan is mostly influenced by the value/amount of the assets your business has.
This also means that you as the borrower will not take on as much personal risk as you would with a traditional bank loan.
3. An Asset-Based Loan Functions Like a Credit Card
Most traditional lenders will pay you a lump sum of cash when you’re approved for the business loan.
However, an asset-based loan functions a bit more like a credit card.
Essentially, your company can use the money from the loan only when you need it — and you only have to make interest payments on the money that you actually use.
Most other business loans require you to pay interest on the entire lump sum loan amount, even if you’re not currently using it.
4. Less Lender Involvement
With an asset-based line of credit, you can rest easy knowing that you won’t have to worry about regulatory reviews from the lender or stipulations on what you can use the loan money for.
You won’t have to transfer over the ownership of the accounts receivable to your lender, either, which is a huge relief for many business owners.
Where Can You Find the Right Asset-Based Loan?
Now that you know the key differences between an asset-based loan and more traditional lending options, you’re ready to make an informed decision about which option is the better fit for your business.
Interested in applying for an asset-based line of credit?
At Dealstruck, we make it easy.
Click here to begin the loan application process and get your business’s finances back in the black in no time.