How Asset-Based Loans Work for Small Businesses

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How Asset-Based Loans Work for Small Businesses
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What Is Collateral?
Collateral is any asset accepted by the lender to
secure a loan. Asset-based lenders typically
prefer collateral that can be easily liquidated
into cash if the borrower defaults on the loan
agreement. Some examples of collateral for a
business ABL may include

• Commercial or residential real estate
• Equipment or inventory

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• Accounts receivable
• Business or the business owners personal
  investment accounts, like an IRA or 401K
• Personal savings accounts
• Investments, like stocks and bonds

Each lender will consider collateral differently,
so be sure to check the disclosures to see what
the bank will accept as an asset.
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Types of Asset-Based Loans
Most types of small business loans can be set up
as asset-based if you are working with a bank,
credit union, or online lender that issues
asset-based lending options. Some types of
business financing that are commonly set up as
ABLs include the following.
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Commercial Real Estate Loan
CRE loans and business mortgage loans are
considered asset-based lending because when a
borrower receives a loan to purchase land,
buildings, or office space for their business,
the loan is secured by the asset that is being
purchased. The lender has the right to seize the
newly purchased or renovated property if the
borrower defaults by placing a lien on the
property. Purchasers will not be provided the
title for the real estate until the debt is
repaid in full.
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Equipment Loans
Equipment financing is a small business loan
option used to make large purchases, like
machinery, business equipment, computer hardware
and software, and vehicles. Equipment loans are
popular because they allow borrowers to finance
100 of the equipment price. The purchased
equipment then becomes the collateral on the
debt, so the loan term is typically the same as
the estimated useful life of the asset.
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How To Find Asset-Based Financing for Your Small
Business
Finding asset-based financing is easy and taking
the appropriate steps will ensure that you
connect with the right lender and the correct
type of business loan option. Before applying for
a secured loan, you may want to explore other
business financing options, like SBA loans or
revolving lines of credit, with the lender youve
chosen.
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Find the Right Lender
Traditional financial institutions, like
commercial banks, offer secured loan options.
Alternative lenders also help their customers
secure asset-based loans, and potentially give
credit approval to those who wouldnt normally
qualify.
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Gather Your Documents
The documents you will need to apply for a small
business loan will vary depending on the lender,
the type of loan, the total loan amount, and your
creditworthiness. Preparing the following
standard loan documents ahead of time will speed
up the loan application and approval process.
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• Business financial reports, like the balance
  sheet, budget, and income statement
• Business and personal credit reports
• Accounts receivable and accounts payable ledgers
• Business banking information
• Deed or proof of ownership for collateral

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Why Choose Biz2Credit?

• Trusted partner for franchise funding
• Biz2Credit was founded in 2007 and has provided
  more than 10 billion in loans.
• Dedicated support team
• Tailored financing solutions

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Thank You