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.
So before anything else, the first question that one should ask would be which collaterals can be considered for this type of loan. Well, one of the most popular forms of collateral are accounts receivable which is cash that debtors will pay to the company. Other than that, there would also be the equipment that the company uses or the merchandise that the company sells.
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.
Of course, there would also be a cost to the loan. The usual cost of taking this sort of loan would really depend on the lender who is shelling out the money but the usual practice of these lenders are to put the cost at around seven percent. However, some lenders may put the cost at around ten to seventeen percent depending on the risk involved.
The next thing to think about now would be the process of getting the loan. Take note that the lender usually does a full background check on the company of the borrower by looking at the overall financial status of said company through financial statements. Other than that, the lender would also evaluate the total value of the collateral that is presented to him or her.
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.
As one can observe, the cost of this loan is pretty high if compared to the traditional ones. However, the advantage would be time and accessibility on the part of borrowers. At the same time, lenders will have the safety since it is easy for the lenders to get hold of collaterals that can be used to pay off the loan.
So before anything else, the first question that one should ask would be which collaterals can be considered for this type of loan. Well, one of the most popular forms of collateral are accounts receivable which is cash that debtors will pay to the company. Other than that, there would also be the equipment that the company uses or the merchandise that the company sells.
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.
Of course, there would also be a cost to the loan. The usual cost of taking this sort of loan would really depend on the lender who is shelling out the money but the usual practice of these lenders are to put the cost at around seven percent. However, some lenders may put the cost at around ten to seventeen percent depending on the risk involved.
The next thing to think about now would be the process of getting the loan. Take note that the lender usually does a full background check on the company of the borrower by looking at the overall financial status of said company through financial statements. Other than that, the lender would also evaluate the total value of the collateral that is presented to him or her.
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.
As one can observe, the cost of this loan is pretty high if compared to the traditional ones. However, the advantage would be time and accessibility on the part of borrowers. At the same time, lenders will have the safety since it is easy for the lenders to get hold of collaterals that can be used to pay off the loan.
About the Author:
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.
No comments:
Post a Comment