By Andrew Binetter
Small business owners seeking start-up loans from banks may be in for a rude awakening. About 75% of all small business loan applications are denied by banks, leaving entrepreneurs struggling to find suitable financing for their operations. Thankfully, there is an alternative: asset-backed financing. In simple terms, asset-backed financing uses business assets to secure a loan. Assets – the loan collateral -- can include equipment, vehicles, real estate, and inventory. If a business owner should default on the loan terms, the lender takes control of those assets until the outstanding debt is paid. Typically, asset-backed loans are structured much like revolving credit. This gives the new business owner access to a continual line of financing for operating costs and expansion as needed. To begin, lenders assess the value of business assets, and often prefer the backing of accounts receivable to secure the loan. Accounts receivable may also provide superior value, typically in the 75-85% range. Physical business assets are harder to convert to cash, and lenders offer lower value percentages for these assets. While interest rates may be higher than conventional loans, the flexibility and continuing access to capital makes asset-backed financing options a logical step. Learn more: https://andrewbinetter.tumblr.com/post/188383585908/typical-errors-to-stay-clear-of-when-starting-a
