GMA will offer you the best rates for whatever size bank loan you need. With access to multiple financial institutions we can do the work for you in finding the best company and rate.
“GMA has a great knowledge base of the finance industry and have provided us with a line of credit that has helped us grow our business and profits substantially. We have 24 hour service and they have been flexible to meet all of my business demands. ”
“We shopped around for the best rate and finally settled on GMA. They have more flexible financing options than the other factoring companies we tried. I appreciated their hands on service and same day funding. ”
Business executives seeking loans often find that the business does not meet rigid bank loan qualification guidelines. Faced with a need for funds and an inability to borrow from traditional lenders like banks, business management has been forced to consider other options. Asset based loans offer one solution to this financial challenge. An asset based loan is a secured loan backed by a company’s accounts receivable, equipment, real estate or inventory.
Asset based loans and lenders have played an important financial role in business for decades. Not all businesses are suited for this type of financial arrangement. Distributors and manufacturers are likely candidates for this type of financing. Certain service companies that carry significant receivables on their balance sheet are also possible asset based lending clients.
Cost of Capital
While these loans play a key role in the health of many businesses, the cost of capital advances from an asset based lender is considerable. Compared to banks, it seems high. Rates vary, usually running from about 12 percent to 28 percent. Since the risk is higher for asset based lenders, the interest rate aligns with the perceived risk. Funds advanced are usually for $100,000 or more.
The focus on qualifying for a cash advance from an asset based lender is based on a company’s assets versus future income for a bank loan. Getting approved by an asset based lender requires submission of current financial statements, proof of verifiable reporting systems and inventory levels. Financial statements may be reviewed by a CPA.
Businesses are usually required to show an acceptable net worth to qualify as well as a positive outlook for future profitability. Business projections for the next year, broken down by month are also reviewed to assess financial health. Business owners are required to guarantee the loan and require personal financial statements to support each individual’s ability to do so if necessary. Some lenders will also require a life insurance policy be taken out from the key players for added reassurance that an untimely death will not negatively impact the company’s ability to repay the loan.
Asset based lenders loan money to companies in the form of a revolving line of credit or as a lump sum with a fixed repayment schedule. Loans based on working capital needs with accounts receivable or inventory used as collateral are likely structured as a revolving line of credit. Once approved, cash advances are made on request by the borrower. When accounts receivable is the pledged collateral used, the lender takes control of assigned receivables and collects payments directly from the borrowing companies’ clients for repayment.
When fixed assets are used as collateral, the loan repayment schedule typically coincides with the useful life assigned to that asset. The useful life is an accounting term determined for accounting and depreciation purposes. This type of collateral is considered to be a higher-risk proposition; so fewer lenders will offer this type of financing.
Asset based lending offers one excellent borrowing source for businesses in need of business capital. While the capital is expensive as compared to most bank loans, the cost may be well worth it in high-priority situations. Borrowing against company assets is one excellent way to liquidate assets for operational purposes.