If you’re a business owner, one of the key parts of that business may be the equipment you own. It may also be the most valuable.
This information is important because if you need a loan, you may need to put something up as collateral. It’s also useful if you want to sell the equipment, or if you simply need to know the value of your business.
Now, the key to success is having a good strategy as well as good clientele.
The decisions you make along the way are dire. And in an emergency, you may need to decide quickly what you are going to do about the future of your business.
It’s important to know your options ahead of time so that you are prepared to make a choice.
The information here may help you decide.
If you find out you have money you didn’t even know about, is there a reason to worry? What doors can this open for you? This is just the beginning of the journey to asset-based lending.
Asset-based lending is one option you have when you know the value of your equipment. You may just need to clear up some debt, or maybe even purchase something for your business. There are many reasons to need a bit of extra money. Whatever the reason, this could be a great option for you and your business.
This type of lending simply takes your assets and uses them as collateral.
As a business owner, it’s always important to know what’s best for you and your business.
Before You Seek a Lender
Knowing your business is one thing. But when you are in need of money–and fast–it’s important to know what your options are, and also how it all works.
You need to be aware of what they are looking for.
You may go in looking at the balance sheet for how much your equipment is worth (generally the right side of the sheet). However, they may look at the part of the sheet that includes the depreciation that your equipment might have incurred (generally the left side of the sheet).
You could be talking about millions of dollars in difference.
It’s also possible that there is equity in your equipment that you are missing. A good lender knows where to find this equity and how to help you use it.
Many people might think a line of credit is a good option, but lenders are often wary of extending a receivables-based line of credit. There’s a risk of intervening lien holders. This can occur when contractors and subcontractors don’t pay subcontractors–causing a lien to be put on a job. Then, they obtain priority over the lender’s lien on the receivable.
Asset-based lending is often a better way to go. It determines the value of what you have, and allows you to use it to your advantage.
It’s much simpler as well. Therefore, you need a lender that specializes in this kind of transaction, as well as several other factors.
Choose Your Lender Wisely
Now that you know a little about the asset-based lending and knowledge you need to know before seeking a lender, there are a few things to keep in mind when choosing a lender.
Find out if the lender has experience in your industry.
You will get the most from a lender who works in your industry, understands the risks, and knows how to value collateral property.
Then, you need to find out if they can finance your specific asset mix. Lenders most commonly finance accounts receivable, inventory and equipment. Different lenders are experts for different assets, so it’s important to find a lender that is comfortable with your specific mix.
Next, you should find out how long they have been in business. Whether or not they are established business matters.
Then, it might be good to know how they are funded. If they’re bank-based, they are probably making money through deposits and selling certificates of deposit to institutional investors.
Independent asset-based lenders, however, are funded likely through multiple sources, including lines of credit, private equity and hedge funds.
Next, you need to make sure what they are charging is affordable to you.
You also might want to know their procedures regarding customer contact. Lenders often work with you to process client payments. This often requires a special bank lockbox.
Some lenders contact their clients from time-to-time to ensure accuracy with invoices. Make sure you are aware of their practices, and you are comfortable with them.
Last, check to see if an on-site audit is required. There’s not much you can do about it, but you need to be aware of its cost and how it affects your loan.
Value Goes a Long Way
There’s a lot you can do when you know the value of your equipment in your company, and asset-based lending is just the beginning.
Equify is just one of many lenders that is available to help with asset-based lending. There’s so much that goes into having a business, and so many important decisions that need to be made to help it flourish.
Whatever your business needs, be sure to review all of your options.
Knowledge is power in all situations, and starting with the value of your equipment is one big step that can open many doors for you. It doesn’t just have to be with loans, but in determining where cash can flow from other areas.
Securing your future is the ultimate goal. Finding a lender that works with your goals is the best thing for you to do.