To so many small business owners, the idea of asset-based loans seem out of reach. What exactly are they? Is it the same as factoring? Is it right for my business? There are many concepts and questions to wrap your head around as a small business, but asset-based loans (ABLs) do not have to be one of them. Let us examine one of the biggest questions we receive on ABLs.
What Assets are Used in Asset-Based Loans?
Much like factoring, ABLs involve a business receiving funds based primarily on their accounts receivable. As a secondary factor, the lender will also take into consideration the company’s inventory, machinery and real estate as valid assets to take into consideration. Based on an assessment of these factors, a value is appraised and a loan amount is calculated. Intangibles, such as trademarks, or even patents on a brand’s name can be considered assets if deemed valuable by a third-party professional.
A salient factor to take into consideration when trying to quantify your assets for an ABL is that assets must be easily turned into cash for the asset loaner. This is known as liquidity, and it plays a major factor in the eligibility of your assets. If the liquidity on your assets is high, you may see a higher advance rate on your borrowing base. Note that some valuable assets that may be harder to turn into cash will still be considered, especially if the loan is expected to be longer term.
Basically, other than the value of your small business’ accounts receivable, all liquid assets can be taken into consideration and valued appropriately, usually by a third party. ABLs are a legitimate method of sustaining an established small business, offering the flexibility that many need in order to get their companies back on track.
AmeriFactors Financial Group, LLC specializes in getting you the cash you need for your business in order to increase your inventory, make payroll, or even give yourself a much needed bonus. As a small business owner, you shouldn’t be burdened by financial woes. Through our line of financial services such as accounts receivable financing (factoring), asset based loans, and business cash advances, we are confident that AmeriFactors can help your business grow for the long term. Fill out our easy quote request form today or give us a call at 1.800.884.FUND.