Asset Based Finance - A Little about Asset Based Financing
It can be defined as the provision of structured working capital and loans, secured against company assets, such as land and buildings, plant and machinery, vehicles, stock and debtors. It is used by businesses and individuals that use assets as collateral. Since the assets act as a guarantee to the loan, the business or individual doesn't need to have excellent credit; the quality and quantity of the securities are the only factor of concern.
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This financial help is known by different names:
It is called a non recourse loan that does not any personal or business liability. It can be for personal or business reasons, and it can be used for any reason.
Since there is no credit the whole application process is very simple and very fast. There are six basic steps:
- Fill out the online application with the needed information about the proposed collateral and the amount of the funds your company needs.
- Show proof of ownership of your securities.
- Lender looks at the documentation provided and decide on the terms and loan to value ratio based on the pledged collateral
- Sign on the loan
- Arrange for your securities to be transferred and plan on making quarterly payments.
- You receive the funds within 3 to 5 days
Once the asset based loan is due, you may pay off the loan and get back the same number of pledged securities. You can also decide to refinance the loan if you want to keep enjoying the benefits of the loan.
Remember that the term ranges from 1 to 25 years. That period of time gives you or your business enough time to arrange for other more traditional forms of payment.
As with any other type of financing, it is important for you to learn as much as you can about how an asset based loan works. By doing so, you can potentially save thousands of dollars in the life of the loan.
Asset based finance is indeed a good choice for borrowers who do not have any inhibition to pledge his property as security to avail a loan. With the assistance of these loans borrowers can fulfill their various needs. It is immensely popular among the masses because of its cheap interest rates and flexible repayment terms.
