The Careful Steps to Take When Using Business Assets for Collateral
Obviously it’s necessary to be very careful with your business assets when you’re using them as collateral for any loan. Working with the wrong financial plan can jeopardize valuable assets owned by your company, as well as the company itself.
Here are some things to keep in mind when using business assets as collateral.
Determine the actual value of your assets
As a first step in the process, it will be necessary for you to determine the real world value of your business assets, so that you don’t have to accept a valuation imposed on you by a lender. This is very important, because lenders tend to underestimate the real worth of assets, because it’s to their advantage to do so.
Weigh risks versus benefits
There are serious risks involved with using your assets as collateral, especially when you don’t pay attention to the lending terms. One of the big advantages of using your assets as collateral is that you don’t have to go through an extensive credit check, and you’re much more likely to be approved. There is always the possibility however, that you will be unable to make payments at some point, and that will put your business assets at serious risk. That’s why you have to carefully weigh the benefits of taking out a loan, versus the risk involved if you are forced to conduct business without those assets.
Find out what can be used for collateral
Regardless of what some of your business assets may really be worth, it won’t matter if a lender is not willing to accept them as collateral. Some lenders are very specific about the kinds of equipment or assets they will accept as collateral, so make sure to inquire beforehand about which asset types would be acceptable. Being thorough like this will also give you time to consider alternatives, if you are unable to go through with an asset based loan.
Asset-based funding with Fintrus
Although we do offer asset-based lending opportunities, we also provide other financial products for small business owners to help them with business growth. Contact us at Fintrus so we can explore the opportunities for your small business to become more stable and experience real growth.