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Here at CNH Finance, we often receive questions from small business owners about the specifics of asset based lending. With all of misinformation floating around online from less than reputable sources, we gathered our team to put together a list of asset based lending FAQs to give entrepreneurs an inside view of how it works, how it stacks up to other forms of financing, and its advantages.
Is asset based lending a loan?
This is question we get asked most frequently, which is why it’s at the top of our asset based lending FAQs. Asset based lending is not a loan. Asset based lending is a business line of credit, so there is no debt involved.
What should my business credit rating be to get asset based lending?
Asset based lending is a different type of credit. Instead of using your business credit ratings, the line is structured around the value of fixed assets owned by your business. In fact, most businesses see their credit ratings improve by using asset based lending.
What are fixed assets?
Fixed assets are items owned by a business. Equipment, inventory, receivables, vehicles, real estate – all of these things are assets. The key with asset based lending is that the assets must be owned. Leased property and equipment do not count as fixed assets, and cannot be used to create a line of credit.
Is asset based lending a one-time financing option?
Not at all. Asset based lending is a revolving business line of credit. Businesses use capital form asset based lending as needed, and then repay the amount, which replenishes the financing available. Many businesses use asset based lending as an extra source of working capital, instead of going into debt with bank loans.
Is the financing available through asset based lending a static amount?
Th amount of financing available through asset based lending is designed to grow with a business. As a business acquires more fixed assets or generated higher sales, we will reconfigure the amount of financing to reflect that growth and success.
Who uses asset based lending?
The truth is, businesses across all industries use asset based lending. Manufacturers, healthcare providers, assisted living centers, trucking fleets, niche IT companies, those starting new businesses, and more use asset based lending to get a source of working capital, while sidestepping the red tape of traditional loans and cash advances.
Add more to our asset based lending FAQs
Do you have a question about asset based lending that wasn’t covered here? Contact our offices today, and our team of experts will help you iron out any details.