Often, before a big purchase can be made the buyer will need additional funding and financing. There are a lot of ways to secure this financing but a great option that’s often forgotten is asset-based loans. 

An asset-based loan essentially uses the buyer’s current assets as collateral in case they have to default on the loan. It’s a more secure option for both the lender and the buyer. This type of option serves a very specific group of people and circumstances, so it’s not talked about often. 

Not to worry, we’ve got you covered with the key questions you should ask about asset-based loans to see if it’s the right option for you. 

1. How Does Asset-Based Financing Work?

Asset-based finance sounds a bit complicated, but it’s actually very straightforward and often very simple to secure. 

Most lenders rely on your credit score to determine whether you are a safe bet or not. While your credit score will still be a factor, in this type of loan you put up an asset you already own (real estate, for example) as collateral. This means that in the case of a default, the lender can take your assets to cover the costs. 

Because of the way this financing works, most asset-based loans have simple interest terms and fixed rates for the life of the loan. That obviously makes them a very desirable choice for many. 

2. Which Type of Financing is Best for Me?

Within the asset-based financing umbrella, there are a few different options you can choose from. The options vary slightly but these slight changes can make a big difference over the life of the loan. 

Many asset-based finance companies will have specific packages based on the actual purchase being made. So they may have an aviation financing package, a Cessna financing package, and a yacht financing package. Each one will be tailored specifically to the needs of that type of purchase.

You should work with your asset-based financing expert from Shearwater to determine the best course of action to get your purchase made as quickly as possible.  

3. Where Can I Get Asset-Based Financing?

The first place you’ll need to start when trying to secure asset-based financing is if your financial institution even offers this option. Many typical banking companies don’t do this type of lending. 

The typical client may not have the type of assets needed to secure this type of financing, so it’s not worth a bank’s time to have this be a product from their company. This is why it’s best to work with a company that exclusively deals with this type of financing, like Shearwater. 

These professionals have a deep, clear understanding of the loans and can get everything figured out for you quickly and efficiently. 

4. How Do I Know if They’re the Right Lender?

Taking out any kind of financing is a big decision that you’ll be living with the consequences of for years to come; good and bad. So who you choose to work with is critical to make it a good experience. 

The most important thing to consider when finding the right lender for you is how credible they are. 

This means you should check out their credentials to be sure they’re a legitimate company and have the proper qualifications. Reading their online ratings and reviews from past customers can also be helpful in seeing what your experience will likely be. Nothing will be as good as giving them a call and asking all of your questions up front. 

5. How Are the Loan Terms Determined?

One of the biggest deciding factors in if asset-based financing will work for you is the terms of the loan. You should be absolutely clear on what they are before you agree to anything. Asking about the terms should be one of the first things you do. 

But you may also be wondering how the terms of the loan are decided at all. Every organization operates a little differently, so it’s helpful to know why you’re getting certain rates or there are different stipulations within the loan than from other options. Asking how these things are determined can help you make a more informed decision and find the best fit for you. 

6. Are There Any Downsides? 

When going into any new financial situation, it’s important to have a clear view of what to expect; both the good and the potentially bad. Asking your lender to be upfront about both sides can help you be more prepared and do your part to avoid any negative consequences. 

The main downside that some borrowers see from asset-based financing is that there are stipulations for payment plans. They may not be able to pay back the loan early based on the terms of the agreement. 

It’s hard to say what a downside is or isn’t because everyone’s situation is so different. But it’s important to ask the hard questions so you know exactly what you’re getting into. 

7. How Do I Get Started?

Securing asset-based financing is very similar to securing traditional financing. You’ll go through an application process and provide the lender with all the documentation they need to verify your situation. 

From there you’ll be given your options for financing with the loan terms laid out for you to decide from. Once you decide, your lender will process your application and get you the funds. The timeline for these transactions varies depending on who you’re working with exactly but it shouldn’t take longer than the traditional route. 

Everything You Need to Know About Asset-Based Loans

Dreaming about and deciding to make a big purchase is so exciting. Getting the financing figured out can take all of the fun out of the whole experience. When you use asset-based loans you can secure your financing much quicker and simpler than other options. 

With just a short application process you can be on your way to making your dreams a reality. 

If you have more questions or are ready to get started with your asset-based financing, contact us today! 

Would you like to find out how we can help you obtain a customized financing solution?

Call us, and we will be happy to discuss your requirements.