When your small business requires a large amount of funding and the lending agency is not willing to provide an unsecured loan, you may be required to provide collateral to get the loan. This is known as asset based lending wherein your high value asset, which could be real estate or any capital equipment in good working condition. There is another side to this kind of loan and that is when you specifically apply for equipment funding or real estate funding. In this case, the equipment or real estate that you purchase with the loan will be collateralized till the time the loan is repaid in full. In addition to that you can go for accounts receivable or invoice and purchase order funding as these are valid contracts with fixed values attached to them.
Funding to help you purchase equipment
Contrary to the perception that some people have, business funding for equipment purchase does not necessarily mean industrial machinery or heavy duty vehicles. Any business needs different types of equipment for smooth operations and it could even be air-conditioners or computer systems for an office set up.
In most cases, the lender collateralizes the equipment for which they provide the business capital loans. Small businesses find it difficult if not impossible to get any funding from the traditional lenders like banks and financial institutions. Therefore, they choose to get the funds from alternative lenders.
Need funding to buy additional real estate?
When your business registers high growth, it is advisable to utilize that as an opportunity to expand capacity and aim for a larger market share. Whichever industry you may be in, capacity expansion invariably means more space. Get easy funding to purchase real estate for accommodating more resources.
The real estate that you purchase with the small business funding will be mortgaged to the lender as collateral till the loan is completely repaid. It is one of the most comprehensive forms of asset-based lending since real estate prices always appreciate. It lends solidity to your mortgage.
Quick funding through invoice factoring
Project based businesses like construction contractor firms that receive phased payments are in desperate need of cash at the end of every project as their expenses are very high. Construction invoice factoring loans are ideal for such businesses to ensure all round smooth operations.
The payment for the invoices that such businesses raise at the end of every phase of a project comes after 60-120 days, which is a very long time. Construction Invoice factoring allows you to leverage your invoice, which is a valid contract with a value, to access the funding at a cost that is adjusted from the invoice payment.
Purchase order funding to stabilize supplies
Similarly, if you are in manufacturing or wholesale supply, you keep receiving a lot of purchase orders from customers. It is not always possible to fulfill all the orders because there is a substantial cost involved with every supply order as well as a 30-45 day timeline for payments. Unique funding solutions like purchase order financing allows you to leverage such purchase orders, which are valid contracts with a value, to access funds and fulfill your entire order book.