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5 Reasons to Choose an Asset-Based Loan

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When looking for business loans, most business owners see asset-based lending as a second option. They only apply for one if they’re denied a small business loan from traditional lenders. But contrary to popular belief, asset-based loans are one of the best funding options for your business. Here are five reasons why you should apply for an asset-based loan:

1.   Your business is growing rapidly.

Startup companies often struggle with securing additional working capital to keep up with increasing demand. However, we all know how tough it can be for new businesses to qualify for small business loans. Traditional loans usually require a minimum number of years in business, along with a strong revenue stream.

Unlike traditional lenders who are more concerned with your business history, asset-based lenders focus more on the future of your business, like your sales and cash flow projections. This means that asset-based loans are perfect for rapidly growing businesses.

2.   Your business has valuable assets you can use.

Machinery and equipment, commercial real estate, pending invoices, inventory – if your business owns valuable assets, you can apply for an asset-based loan. These assets can serve as collateral to help your secure the working capital you need.

3.   Your business doesn’t have a good credit rating or a strong revenue history.

As mentioned, asset-based lenders less concerned with your business history, profitability, cash flow and even personal and business credit scores. They are mostly concerned with the value of your collateral. For this reason, asset-based lending is a great option for small businesses with valuable assets, as well as business owners with poor credit rating.

4.   You need flexibility in your financing solutions.

Asset-based loans don’t come with many limitations regarding the use of funds, given that they’re solely used for your business. You can use the funds from an asset-based loan to expand your business, buy another business, for working capital, refinance existing debt, or pay for unforeseen business expenses.

During your loan application, lenders may ask you to indicate your intended use of the funds. Furthermore, keep in mind that loan restrictions vary depending on the lender’s guidelines. For most lenders in the market, asset-based loans are more flexible compared to traditional loans.

5.   You don’t have to use personal assets as collateral.

With asset-based lending, there’s less personal risk involved. Most traditional lenders ask you to pledge a personal guarantee or put up collateral in case you default on the loan. Since asset-based loans are secured by your business assets, most lenders don’t ask for a personal guarantee.

While most asset-based lenders don’t ask you to put up personal collateral, some do. It’s important to ask potential lenders about this before transacting with them.


If you think asset-based loans are right for your business, you can contact SMB Compass. We offer numerous loan programs, including asset-based lending. If you want to know more about it, you can talk to one of your lending experts today! Don’t hesitate to give us a call at (888) 853-8922or email us at info@smbcompass.com.


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