You need money to make money. That’s true in Florida and anywhere else in the world. For the most part, you will have to start by putting your own money but that may not be enough. Fortunately there are several other ways you can get financing in Florida.
Right now, the banks in the state are becoming more amenable to lending. They’re growing their loans at double the national rate. But should you consider approaching asset based lenders in Florida?
What Are Asset Based Loans?
These loans are a type of finance which use assets as collateral. In general, these assets are usually either your accounts receivable or your inventory. You agree on a percentage with the asset based lenders in Florida, and you get an advance on the value of your asset. That’s usually 70% for the receivable, but in a few cases up to 90% may be offered. For completed inventory, the percentage is usually 50%.
Essentially, what you’re doing with the loan is getting your own money in advance than waiting for the money to be paid to you.
Applying for Asset Based Loans
Quite a lot of financial institutions offer this type of loan in Florida. But it may not be as easy for you if your company is relatively new. It may also prove easier to apply for a larger loan than for a smaller one, because it costs the bank the same amount of money to monitor a large asset-based loan.
If you want to apply for an asset based loan, your business should have good financial statements and reporting systems, along with easy-to-sell inventory. You also need customers who have a good reputation of paying their bills on time. You will need financial statements that are accurate and detailed. They have to look professionally prepared so that you can show that you’re on top of your business. You also have to convince the asset based lenders in Florida this is a viable loan.
Pros and Cons
There are advantages and drawbacks to securing asset based loans. On the bright side, these loans can be the key to help your business overcome temporary hurdles or to give you the money you need for growth. Asset based loans can provide the capital for businesses that are recovering from a slump, insufficiently funded, experiencing rapid growth, or highly leveraged. These loans are perfect for those whose cash flow is affected by industry or seasonal cycles.
On the other hand, the likelihood of getting the loan approved depends largely on the quality of the accounts receivable. The advances you may get may only come from receivable which have a high credit rating or pay in less than 60 days.
The interest rate may also be higher than traditional loans, and usually your customers will pay the money directly to the lender.
So should you opt for asset based loans? That’s entirely up to you. But if you need the capital then this option must be considered.
