Asset-Based Lending is the type of financing solution that gets secured through the tangible assets of a business. These assets may include a business’s accounts receivables, inventory, machinery, or various other types of collateral. A business is able to borrow about 75% to 80% of their accounts receivables or about 50% of their inventory and equipment assets.
As compared to others, this small financing option is very easy to get qualified for. The lenders do not face high risks due to the presence of tangible collaterals. In case of failure of payments, the losses can be recouped by seizing and selling the collaterals. In these cases, how can you ensure that your application gets approved sooner?
How to apply for ABLs?
When you are in the process of filing the application, there are certain steps involved which might vary in contrast to applying for traditional loans. Follow these steps for applying:
Evaluating business finances
The lenders are primarily concerned with the value of your business assets, but they do not completely disregard your financial standing. There are lesser chances that the lenders will be reviewing all your documents, but it is better to have them handy.
- Balance sheet
- Profit and loss statement
- Sales forecast, if the business is new
- Business’ bank statements
- Business tax returns
Identifying the assets
In the next step, you can use the above documents to prove the value of your assets to potential lenders. You can also have these additional documents:
- Accounts receivables aging statements
- Inventory lists
- Machinery and equipment list
Keep the assets free and clear
A UCC (Uniform Commercial Code-1) is normally performed by lenders after receiving your applications. This would reveal if the creditor has a legal interest against personal or business properties. Free and clear assets would mean that no debtor has any right on the same and it is collateral to the lender exclusively.
Complete the application
Complete the application in the next step and submit the necessary paperwork. To prevent having your details audited by a third-party, try checking directly with the lender to clarify everything.
Preview the offer
After reviewing the assets and your application, the lender might ask you to settle with a preliminary offer regarding the loan. Try taking time to understand the details and preview it multiple times before accepting it as a final offer. There can be room for negotiations too.
Get your ABL approved at the soonest with the Accord Financial asset-based lending solutions.