Are you finding that the financing for your next private jet, yacht, or high-end real estate property is a bit problematic? Maybe it’s due to the economy, the general business market, or personal circumstances.
Others in similar circumstances have decided to look beyond standard bank loans for the needed capital. They’ve come to appreciate the benefits of asset-based financing.
What Can You Finance With an Asset-Based Loan?
You can use your assets to finance whatever you’d like. Some asset lenders specialize. For example, Shearwater Aero Capital is a financing expert for aircraft, aviation equipment, yachts, and high-end real estate.
Aircraft Financing
Private asset lending can make sure that you’re not standing in line waiting for your next flight. Instead, procure a new Gulfstream or Bombardier, so your plane is ready when you are.
If you’ve had new additions to your family, an asset loan can make it simple for you to upgrade to a larger plane capable of transporting everyone, including the in-laws.
Aviation Equipment Financing
Sometimes the big purchase isn’t a new aircraft but new flight equipment. Using the latest technology isn’t about being cool or flashy. It’s about safety.
You wouldn’t think of driving your family across the country in a car with no power steering and antique drum brakes, so why fly them in an aircraft using outdated navigation equipment? Asset financing is all you need to bring your cockpit instrument panel into the 21st century. Oh, and while you’re at it, you might consider getting rid of that 1980’s upholstery.
Yacht Financing
Getting away on the open sea is a blessing during the stressful times in which we live. If you need to overhaul your yacht or purchase a new one, it’s possible with asset financing.
Whether you’re acquiring your first yacht or you’re ready for a superyacht, if you have enough available assets, the ship of your choice can be yours.
Luxury Real Estate Financing
High-end real estate financing for Paris, Berlin, and Miami appears to be poised for growth. Shearwater can help you finance a deal for that Paris apartment that will put you in easy commuter reach of all the activities surrounding the 2024 Summer Olympics.
The Advantages of Asset-Based Financing
Asset loans allow you to put valuables that you already own to better use. Yachts that you don’t use as often as you used to, vacation homes that sit idle, and collectible artwork packed away in storage can all serve as the means to secure your next loan.
In case of unforeseen difficulties repaying the loan, you won’t risk losing your primary residence or business as you might with a traditional mortgage refinance. Asset loans allow you to make a wanted purchase without jeopardizing your future. You can quickly have the needed capital to realize your next dream.
Asset Loans Don’t Require Tremendous Cash Flow
Private asset lenders evaluate potential loans differently than do their counterparts in the traditional bank industry. Those differences can mean approval for an asset loan but rejection for an unsecured loan.
For starters, banks will pay special attention to your cash flow. They want to make sure that you have enough money coming in each month to allow you to make your loan payment.
In contrast, asset lenders pay less attention to your cash flow. Your loan is secured by collateral. Your assets are what interest asset lenders. If your cash flow should dry up and prevent you from meeting your loan repayment obligation, the asset lender can recoup its losses through the acquisition of your collateral.
If you are experiencing cash flow issues, it’s in your best interest to consider using an asset lender. If you have suitable assets to use as collateral, your loan potential may be much greater than if you were to do business with a bank.
Asset Loans Come With Fewer Restrictions
Borrowing from an asset lender for business typically gives you more freedom to operate your company as you see fit. On the other hand, when banks issue substantial loans, they may impose a number of restraints known as covenants.
A frequently-used determinant that banks use to set up a covenant is the ratio of the borrower’s net debt to his earnings before interest, taxes, depreciation, and amortization (net debt to EBITDA). This measurement gives a reliable estimate of how long it will take for the borrower to repay his loan.
Using your net debt to EBITDA ratio, a bank may specify the amount of additional debt that it will allow you to assume while you’re still carrying the bank’s loan. The bank doesn’t want you to take on additional loans from other lenders if it results in you not being able to meet your payment schedule.
However, most asset lenders don’t care if you take on additional debt after securing a loan from them. Once again, if you obtained your loan using your assets as collateral, the asset lender is assured of not taking a loss should you overextend yourself.
Other factors that traditional lenders will consider that private asset lenders pay less attention to include:
- A high business credit score
- A high personal credit score
- The size of your clientele
- How much profit your business makes
- The payment terms you offer clients or customers
- How often you churn your inventory
Asset Lender Often Process Loans Faster Than Banks
If you need your money quickly, you can typically receive funds faster from an asset loan than a traditional bank loan of comparable size. For example, a mortgage loan can take months during an active real estate market period. In comparison, Shearwater Aero usually closes its deals within four weeks.
If a bank’s underwriter has an additional question concerning any aspect of your paperwork, the delay for a traditional mortgage loan gets even longer. The underwriter can feel the need to request more extensive documentation to validate the numbers stated on your application.
Asset loans from private lenders aren’t subject to the same level of regulatory oversight. Private lenders have laws to follow, but because they don’t have to deal with as much red tape, they can generally move quicker than heavily regulated traditional financial institutions.
How Much Money Can You Borrow with an Asset Loan?
The amount of the loan you can receive from your assets depends on the loan-to-value ratio. In turn, the loan-to-value ratio depends on the type of asset. The safer the asset generally, the higher the ratio.
An asset that the lender can quickly liquidate will bring a higher ratio than an asset that is less liquid. For example, a preferred asset might get a loan offer of 70-80% of its value, while a riskier type of asset might be worth 40-50%.
If your asset isn’t enough to secure your desired loan, you can use multiple assets to reach your goal. The assets need not be the same type. You could use a vacation home and a yacht together to finance your next purchase of a private jet.
Now’s the Time to Try Asset-Based Financing
If you have assets that are ideal for collateral, why not secure your next loan through a private lender like Shearwater Aero Capital? There’s no reason to put off the purchase of your aircraft, aviation equipment, yacht, or high-end real estate. Contact us today to discover how well asset-based financing can work for you.
