Asset financing opens doors for your personal finances or your business’s financial growth. But accessing capital is often easier said than done. Many barriers can stand in the way of you financing your dreams.
Knowing where to start and educating yourself on the best steps to take to get there is how you can keep you and your business in the black. Plus, asset financing can help you stretch your dollar farther.
Adding Assets to Your Portfolio
Making investments is good business practice for every growing company. Some investors expect to run at a deficit for a certain period of time before the business begins making money back.
Adding valuable assets to your portfolio extends beyond cash and the stock market. Physical assets like boats, homes, and planes keep your cash safe, help minimize taxes, and can be used as collateral for additional capital infusion.
Holding assets pays off in the long-run as you gain more access to capital. Additionally, your financial and cash flow statements show healthy investment and growth.
Arguably, there is no better time than now to invest in additional physical assets to grow your business or secure your personal finances. This is because of COVID-19 and the pandemic, which have caused favorable impacts on interest rates for the borrower and overall more affordable prices.
How do you make your dollar stretch farther? First, invest in a diverse array of physical assets. Then, unlock asset financing for further investment in your growth.
Asset Financing Increases Wealth
Asset-based financing is great for companies looking to grow and invest without having to put up a huge amount of cash at the outset. This type of financing also works well for companies that simply have a short-term cash flow issue but need to make investments to capture sales or orders.
Every business has times when it needs to make further investment in its inventory, talent, or other important factors to keep the financials afloat. Having assets on the books to secure financing against keeps cash flow positive.
Because financing is guaranteed against collateral, or your assets, it can be easier to access asset-based financing. This is essential for times of growth – the easier the process, the faster you can get back to what is most important.
Payments on the loans are both fixed and variable, so it is essential to understand how much you might be on the hook for at the beginning of the term. Don’t put yourself in a risky situation by securing more financing than you can afford.
Asset financing has its benefits and is an important part of every business. But there are some restrictions on how you can access asset financing and capital. It is important to understand those restrictions so you can best navigate the complex landscape of financial lending.
Restrictions and Barriers
To access traditional loan financing, you will have to keep up your credit score and follow a strict set of qualifications laid out by your bank or financier. Asset financing is simpler because the entity already has security in being able to appropriate the asset. For instance, if you default on your loan financing, the bank or entity that financed your loan can take back the asset.
The value of the assets must be determined to best approximate the equity amount of asset-based financing. If your assets are quick to depreciate or hold the risk of becoming irrelevant in a short amount of time, you may not be able to secure enough financing to make the endeavor worthwhile.
Additionally, if you have been in business only a short time, you may not have built up enough credibility to gain trust from your lender. This can also restrict the amount of loan financing you can secure.
Lastly, if you do not have a solid customer base, a high number of orders, or the ability to move operations quickly you could lose out. All of these factors are red flags for lenders that can prevent loan financing from moving forward.
How to Access Asset Financing
There are a few steps you can take now to ensure easy access to asset-based financing in the future. Taking the time early on in your business’ lifecycle to work on these tasks will help your long-term viability tenfold.
Purchase Heavily – Don’t Worry About the Bottom-Line
Make investments early-on in a diverse array of assets. Everything from planes to cars can help gain you access to additional business collateral.
The one asset you don’t want to have on your books, oddly enough, is excess cash. This is because having excess cash in your assets signals to investors that you and your business are not investing appropriately.
If your cash flow is negative when you first start your business, this is actually a good sign. Eventually, investors will need to see positive cash flow, but only when your organization has reached maturity.
Build Your Network
Relationship-building is essential to running any business. This is especially so when lenders take the risk of investing in your organization. You never know when the next relationship you build will unlock new doors for you and your business.
Part of building your network involves taking the time to research different types of financing lenders. For everything from real estate financing to private credit, the more you know the better off you will be.
Take Advantage of Every Opportunity
Bank relationships are essential but there are other asset lenders out there too. It can be easy to forget this is the case, but private lenders can be quicker to process loans and more lenient with procedure.
Standardization can have its benefits, but when you need a financier that understands your particular situation, take advantage of private asset lenders. If you don’t, you could find yourself facing denial frequently.
Secure Asset-Based Financing Today
Although the world of asset financing can be complicated, you don’t have to navigate it alone. Do your research, and when you’re ready, loop in the experts.
For more information on specialty finance options or other asset financing information, contact Shearwater Aero Capital today.
