You can access many non-traditional types of lending and revenue sources, which is particularly useful if you’re having difficulty securing or don’t want to apply for traditional loans. One of these is asset-based lending. Here are four facts about this type of lending.

1. The Application Process

Most companies and banks that offer traditional lending options will also offer asset-based lending options. Look for a lender whose lending preferences align with the type of company you’re running and the reason you need the loan. Make sure you have meticulous records of your business’s financial history, including financial statements, inventory, and customer bill payments. Talk to your potential lenders and ask as many questions as you need to about repayment plans, how much collateral the lender requires, and what other records you should include in your application.

2. Loan Amount

Lenders offering this type of loan will commonly utilize the loan-to-value ratio. This ratio is determined by dividing the loan amount by the value of the asset. It helps the lender to determine how much money they’re able to comfortably loan to an applicant based on the value of the collateral the applicant offers. The loan-to-value ratio will typically fall between thirty and eighty percent, though it can be higher or lower depending on the size and type of the asset offered as collateral.

3. Advantages

Asset-based lending has several advantages. These loans tend to be easier to apply for than traditional loans, such as lines of credit or unsecured loans. This means these loans are particularly useful for businesses with poor credit histories or that have taken recent hits to their credit histories. The application and approval process is also much faster. You’re more likely to find asset-based loans with lower interest rates than the typical rates for other types of lending.

4. Things To Keep in Mind

Remember that asset-based lending is largely dependent on the quality of your assets. The lender will study your assets and determine whether your application is worth approving. Your lender can also obtain your assets if you default on your loan. Another thing to consider is that, while interest rates are generally lower than they are for traditional loans, they can still vary and there may be additional fees and costs associated with asset-based loans.

This type of lending can be useful for small business owners, those who don’t have good credit, and business owners seeking immediate revenue. You should always consider your needs and goals before making decisions regarding lending.