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 that one knows the various assets that can be used for the loan, the next thing would be to understand how to value collaterals. For the accounts receivables, the usual practice would be to loan up to eighty five percent of the total accounts receivable amount. As for the inventory or equipment, best practices would be fifty to sixty percent of the fair market value.
The next thing to know would be how much the cost of this loan is. This would really depend on the lender that the borrower is talking to but the usual rate would be somewhere in between seven percent to seventeen percent annually. As mentioned, this would wholly depend on the agreement of the lender based on general risks that are involved.
Now, do take note that there is a whole process to this thing. Before the lender would provide any money to the borrower, he or she has to first do a background check on the borrower and the performance of the said company. This is usually done through examination of the financial statements as well as the collaterals that were offered up for the loan.
When all the background checks are done and all the terms are agreed upon, the money is given. Now, do take note that credit score is not a criteria in lending money. This is because lenders already feel safe even though the borrowers do not pay up since the lenders already have a hold of collaterals that are worth more than the loan itself.
As one can see, it is extremely easy to secure this type of loan, which is why it is popular. As long as the borrower complies with all the background check requests by the lender, then there should be no problem. The lender takes the collateral, and the borrower gets the funds.
Take note that the cost of this loan is quite high compared to conventional loans. However, it is going to be needed if a company has a lot of inventory or equipment but needs more working capital to keep afloat. The best part is that there are no debts involved as actual items are already going to be given up as collateral which makes it safe for lenders.
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 that one knows the various assets that can be used for the loan, the next thing would be to understand how to value collaterals. For the accounts receivables, the usual practice would be to loan up to eighty five percent of the total accounts receivable amount. As for the inventory or equipment, best practices would be fifty to sixty percent of the fair market value.
The next thing to know would be how much the cost of this loan is. This would really depend on the lender that the borrower is talking to but the usual rate would be somewhere in between seven percent to seventeen percent annually. As mentioned, this would wholly depend on the agreement of the lender based on general risks that are involved.
Now, do take note that there is a whole process to this thing. Before the lender would provide any money to the borrower, he or she has to first do a background check on the borrower and the performance of the said company. This is usually done through examination of the financial statements as well as the collaterals that were offered up for the loan.
When all the background checks are done and all the terms are agreed upon, the money is given. Now, do take note that credit score is not a criteria in lending money. This is because lenders already feel safe even though the borrowers do not pay up since the lenders already have a hold of collaterals that are worth more than the loan itself.
As one can see, it is extremely easy to secure this type of loan, which is why it is popular. As long as the borrower complies with all the background check requests by the lender, then there should be no problem. The lender takes the collateral, and the borrower gets the funds.
Take note that the cost of this loan is quite high compared to conventional loans. However, it is going to be needed if a company has a lot of inventory or equipment but needs more working capital to keep afloat. The best part is that there are no debts involved as actual items are already going to be given up as collateral which makes it safe for lenders.
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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.
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