Asset based loans

A secured loan is a loan where you will be required to use your property or other assets, as security against the loan, so the lender is able to balance the risk of lending to you. The amount that can be borrowed differs from lender to lender and your individual circumstances. The amount that can be borrowed, the term available and the Annual Percentage Rate (APR) will depend on:

The value of your property

Your ability to repay the loan

Your personal circumstances

You need to think very carefully about how you manage a secured loan. If you default on the loan you risk losing your home.

So what this means in simple terms is;

In the simplest meaning, asset-based lending is any kind of lending secured by an asset. This means, if the debt is not repaid, the asset is taken.

Asset-based loans are typically for companies with less-than-perfect credit.

Interest rates and fees on these types of loans have fallen in recent years due to intense competition, but generally they are higher than traditional bank loans. As with all commercial lending, rates are negotiable, the higher the risk usually the higher the rate of interest the lender will require. Where assets are also involved the value of asset being used as security will have an impact on the interest rate the lender will require. The Lenders will look at your credit record, how long you've been in business and whether your assets are liquid. Your business plan which will summarise sales, expenditure planned profitability. They will also look at your potential bad debt from your customers as this would possibly have an impact on your repayment capabilities as far as they are concerned.

The main advantage of asset-based financing is that small companies can usually get more cash more quickly than they could from a traditional bank loan.

The drawback of asset-based loans and factoring is the expense. The reason this is the case is because if you default on your arrangement the creditor has to seize your asset then it has to realise the value by selling this asset at the market value. This all takes time and money therefore they factor this into the initial costing to take this into account. You need to weigh your situation carefully and determine whether this type of financing is necessary to expand your company or keep it afloat.