American business was long dominated by the political capital of Washington, DC, and financial capital, New York City. Now, however, regional business capitals are beginning to emerge, causing culture clashes and necessitating unique compromises.
americanbusinesscapital.org can help. With an equipment leasing calculator, credit approval form, and loan limits page available here, you can find what you are searching for.
Asset-Based Lending
Asset-based lending provides businesses with access to funds without being tied down by accounts receivable, inventory costs, or any other fixed costs that could potentially disrupt cash flow. Instead of depending on a company’s credit score as collateral for loans, asset-based lending utilizes physical and financial assets against a line of credit they can draw upon when necessary. It can help smooth out cash flow peaks and valleys by providing immediate access to funds not tied in accounts receivable, inventory, or other fixed expenses.
Asset-based lending offers more flexibility than traditional business loans and can be used to cover operational expenses, make acquisitions, or invest in new opportunities. It typically covers assets like accounts receivable, inventory, marketable securities, and real estate; however, certain purchases such as specialized goods, perishable items, and equipment with a high depreciation rate may not qualify.
To qualify for an asset-based line of credit, lenders will conduct an intensive review and appraisal of your company’s assets. Based on the quality and value of these assets, a lender will then decide the maximum loan-to-value ratio against them and monitor your investments over time – sometimes mandating minimum levels of liquidity to remain eligible for your line of credit.
As asset-based lending is secured against your assets, its interest rates tend to be lower than other business financing options. However, lenders can reclaim and sell them should you default on your loan agreement.
Since this type of financing relies on assets as its basis for funding, it may be suitable for companies with high equity stakes or fluctuating earnings that have high equity stakes or earnings volatility. Furthermore, its less stringent credit requirements make it attractive to small businesses without established track records that qualify them for traditional forms of funding.
Business Loans
American Business Capital provides various business loans and lines of credit, including asset-based lending (ABL), an alternative financing solution that grants credit based on the quality and value of assets owned. ABL may include inventory, accounts receivable, equipment, or real estate. ABL financing could be ideal for business owners who may have less-than-ideal credit and want to keep personal and professional expenses separate.
This company is well known for its straightforward application process, which eliminates much paperwork by letting borrowers connect their business checking or bookkeeping software directly without traditional underwriting information being required. They typically accept businesses that started at least a year ago with an annual revenue of at least $3,000. Borrowers may choose between business lines of credit with repayment terms of six, 12, or 18 months as repayment options.
Some lenders specialize in loans for specific needs, like purchasing inventory or covering marketing expenses. Others focus on industries like agriculture or manufacturing. And then, there are Small Business Administration loans, which set guidelines and reduce lender risk while offering counseling and education support.
SBA loans offer small businesses seeking to finance an excellent financing option, often boasting more competitive interest rates than conventional loans and featuring a dedicated team of loan counselors to aid with application and closing processes.
SBA loans can be obtained through various online lender marketplaces and directly from the SBA itself. Many of these lenders provide a wide variety of business loan products that are well-recognized within the industry, yet their interest rates and fees aren’t transparent, making it hard for small business borrowers to determine whether these offerings are the ideal match for them – other lenders such as Seek Funding provide fewer options but are more forthcoming about their costs.
Business Lines of Credit
A business line of credit is an effective means of short-term financing for your small business. Unlike traditional or term business loans, which disburse the money immediately before being repaid with interest over time, lines of credit act like revolving accounts; you only pay for what you use. Depending on your lender, a line of credit could provide anywhere between $50 to $250,000 in funds with no minimum draw requirements or draw restrictions imposed upon them.
Business lines of credit can help smooth seasonal cash flow fluctuations and cover temporary decreases in sales or fund expansion opportunities, but bear in mind that such financing typically comes with higher interest rates.
When applying for a line of credit, lenders will analyze your business’s finances and history. They may request two years’ financial statements and reports, income tax returns, and any other documentation needed to assess the profit, revenue, and overall health of your organization. Different lenders will have additional requirements, so it is wise to shop around.
Business lines of credit tend to be easier to qualify for than loans, with lower minimum credit score requirements and the possibility of finding lenders who offer lines of credit even to companies with poor or bad credit ratings. Still, it would be prudent to improve personal and business credit before applying for such lines of credit.
When applying for a secured line of credit, lenders typically require collateral in inventory or accounts receivable as protection against default. A line of credit is considered more risky for the lender than loans; many require higher credit scores and evidence of steady profitability to secure one.
Unsecured business lines of credit don’t require collateral and can be offered by online lenders with less stringent requirements. Some may only ask that your business bank account be linked and provide a questionnaire about its financial health – making it easy to compare lenders and find one that best meets your needs.
Equipment Leasing
Equipment leasing is a $1 trillion industry that assists businesses, non-profits, and government organizations in acquiring equipment necessary for operation. Leasing offers creative financing solutions with flexible terms that provide an alternative cash outflow solution while offering tax benefits such as Section 179 depreciation that helps lower purchase prices of new equipment.
Business owners typically rely on financing when making large equipment purchases, according to a recent survey by the Equipment Leasing and Financing Association (ELFA). Their poll revealed that 78% of businesses across all industries depend on loans, leases, or lines of credit to fund such purchases.
While leasing and buying equipment offer viable ways for companies to expand, the best decision will depend on a range of considerations such as total costs, tax implications, maintenance requirements, financing flexibility, and payment terms.
Equipment leasing is a contract to rent or lease equipment for an agreed-upon period, typically up to 84 months, with lower monthly payments than buying options. At the end of that term, you have several options – either returning it, purchasing it at its fair market value, or upgrading to newer models.
When choosing an equipment finance provider, make sure it specializes in your industry and understands your specific needs as an organization. Also, look for lenders that can approve loans quickly with minimal paperwork needed while making all loan payments on time for maximum credit score benefits and lower overall borrowing costs.
