Many business owners still feel that when it comes to commercial lending, things are still quite the same. Though there has been lot of effort from the side of the government to help people start new businesses, the truth is that seeking financial assistance is a daunting task for businesses at present. In such a tight economic situation, most businesses are considering the importance of the role played by asset based lending. This is because this funding solution is the best option for those who do not qualify for the traditional bank loans.
In reality, there are many misconceptions regarding this type of lending and the most prominent among all is that this funding option is the last resort for any business. Well, these lenders have proved as a clear need in the market place and many business owners have been able to increase cash flow in their businesses by taking advantage of this type of lending. Since the economy is recovering, most of the businesses have to rebuild working capital so that they are in a position to complete new orders.
Qualifying for a traditional bank loan is a real problem for many businesses because they are no more creditworthy in the eyes of the bank. Asset based lending is an umbrella term that includes many loans that are secured by the assets of the borrower. If your small business is growing rapidly and you need continuous cash flow, this type of funding is ideal for you. Unlike banks, where they look for the cash flow first, this funding alternative will help you with the cash flow. Although these loans are expensive, they give you a chance to grow and keep going.
Invoice factoring is the outright purchase of the accounts receivables of a company by the factoring company. In this type of financing, the invoice is sold at a discount and almost 95% of the invoice money is received instantly. The rest amount with the fee deduction of the factor is offered only when the payment from the client is recovered.
Besides getting a large amount of money immediately, the company also gets rid of the worries of recovering the money from different clients. Under the invoice factoring funding option the company can choose which of the invoices it would like to sell because once it is sold the factor takes care of the receivable until they get paid. Statistics show that these alternative funding solutions have helped move the economy in positive direction.