These days, it’s not always easy to establish or maintain a food and beverage company. If you own a business in this industry, then you have quite a challenge ahead of you. One of your constant problems will be to make sure that you have readily available resources to cover operational expenses and to take advantage of opportunities for growth. With banks nowadays no longer quite as forthcoming in offering unsecured loans, asset based lending for food and beverage companies have become much more common.
Here are some key facts you need to know:
- What is asset based lending? Basically, you offer your company’s assets as a collateral or security for the loan. It’s a ready-made statement that says you actually have the means to pay back the loan.
- What assets can you use as collateral? If you run a food and beverage company then you may have several assets you can use to secure the loan. You can use your inventory, your accounts receivable, the equipment you use to manufacture your goods, any land or buildings your company may own, or even special patents you own. Even a purchase order can be considered an asset.
- How much can you borrow? That depends on the value of the asset you are putting up as collateral. To determine the value of that asset, it has to be appraised first. Then you can ask for a loan that’s considerably less than the worth of the asset. The more risk involved, the lower the amount you can borrow.
- What are the advantages of asset based lending? Typically, the main advantage is that it is a very straightforward transaction. There really isn’t much of a delay, unlike other types of loans which can really take a lot of time to work out. You have a much higher chance of getting approved for the loan, and often you don’t get any restriction on how you wish to use the money you receive. Since you also offer security, the interest is often less than what other unsecured loans require. The interest is often lower than what credit card companies charge.
- How likely are you to receive the loan? If your asset readily available, then your likelihood of being granted the loan is quite high. Unlike other types of loans, it may not matter as much if you have a poor credit rating. It may not matter if your company is doing poorly and that you don’t see any revenue for the next few months.
Asset based lending for food and beverage companies covers a broad spectrum of possibilities, so you have a great chance of finding a loan agreement that appropriately fits your requirements. With a purchase order, you can borrow half the value of the order at the very least. With your accounts receivable, you can look for a type of factoring that provides you the money you need much earlier than you expected. By leveraging your equipment, you may be able to operate more smoothly so that you finally make the sales and the profits you have been seeking.