It Takes Money to Make Money
This saying is very true in business, where an investment of cash or collateral is often necessary to establish a way to create profit later. Even a merchant online loan will require some cash assurances before it is disbursed, and generally it is the future credit card transactions that a business expects to make in a set period of time. That’s why it’s necessary for a business to understand what their assets are in the event that they need to seek business financing at some future time. Asset-based lending is becoming the norm and it will be up to you to convince a lender that you have the assets needed to repay a loan, even if you default.
Establish Traditional Assets
Business assets like property, investment accounts, equipment, vehicles, and any other type of traditional asset can help you deal with conventional bankers. Even this, though, may not be enough to get them to approve a loan, if your credit is bad. In that case, you may need to turn to alternative lenders. The good news is that alternative lenders will also take far more non-traditional assets as collateral than a bank is willing to do.
Non-Traditional Assets
Merchant lenders are a perfect example of a non-traditional lender that uses future credit card receivables as the “asset” to secure the loan. This makes it easier for companies that are poor on hard assets to still get funding. Other types of assets that can be put up against a note would be valuable artwork, trademarks, customer lists, diamonds or expensive jewelry, and just about anything of value. When you are working with non-traditional lenders you will find the terms are more flexible, but they will still be able to seize your asset if you default. Thus, only put up an asset for collateral if you are willing to lose it.