There are so many ways and methods of financing whether it be through loans or collateral. Now, one of the more common methods of financing that a lot of companies use would be the asset based lending Ventura county method wherein the company puts up its assets as collateral in order to get financing. This provides a safe option for lenders and a fast way for companies to get money that they need.
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, another question that has to be answered would be how the collaterals are usually valued. For the special case of the accounts receivables, the lender would usually give around eighty five percent of the total amount to be used. If ever the company will give inventory or equipment, the loan amount would be somewhere around fifty percent of the total value declared.
Now, another question would be how much the loan would cost. Costs would really differ among the lenders but a general amount would be somewhere in between seven percent to up to seventeen percent. Of course, the borrower would usually negotiate for a lower cost until there would have to be an agreement between the borrower and lender.
Now, do take note that there is a whole process to this thing. Before the lender would provide any money to the borrower, he or she has to first do a background check on the borrower and the performance of the said company. This is usually done through examination of the financial statements as well as the collaterals that were offered up for the loan.
Once the lender has done all that and have agreed to the terms, then money is released. As one can see, credit score is not really mentioned in the process. This is because asset based lenders already have good collaterals so they do not need to do that much of a background check compared to banks.
That is, in fact, one of the reasons as to why these types of loans are so popular in the first place. They are very easy to get as long as the borrower complies with all the requirements set by the lender. If everything checks out, then money is given.
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, another question that has to be answered would be how the collaterals are usually valued. For the special case of the accounts receivables, the lender would usually give around eighty five percent of the total amount to be used. If ever the company will give inventory or equipment, the loan amount would be somewhere around fifty percent of the total value declared.
Now, another question would be how much the loan would cost. Costs would really differ among the lenders but a general amount would be somewhere in between seven percent to up to seventeen percent. Of course, the borrower would usually negotiate for a lower cost until there would have to be an agreement between the borrower and lender.
Now, do take note that there is a whole process to this thing. Before the lender would provide any money to the borrower, he or she has to first do a background check on the borrower and the performance of the said company. This is usually done through examination of the financial statements as well as the collaterals that were offered up for the loan.
Once the lender has done all that and have agreed to the terms, then money is released. As one can see, credit score is not really mentioned in the process. This is because asset based lenders already have good collaterals so they do not need to do that much of a background check compared to banks.
That is, in fact, one of the reasons as to why these types of loans are so popular in the first place. They are very easy to get as long as the borrower complies with all the requirements set by the lender. If everything checks out, then money is given.
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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