Is asset-based lending the right choice for me?

As business owners in Massachusetts are probably aware, cash flow goes up and down and it is important to weather the lows in order to reap benefits in the highs. Unfortunately, there are times when low cash flow makes it impossible for the company to keep functioning smoothly and the costs can no longer be met. Getting out of the financial crisis becomes the top priority of the business owner and one of the options availed is asset-based lending.

This option is availed by people who, for a variety of reasons, are unable to get a traditional loan from a bank. Lenders have filled in the void by providing asset-based loans-by using assets as collateral for the loan, the struggling owner can get access to a loan. Since this form of getting a loan is quicker and more easily available as a method to get a loan, it has gained popularity but it is important to understand the ramifications of it.

Certain assets have more value than others in this process-lenders prefer assets that are easily convertible to cash, have a high value and low depreciation rate. When someone is using their real estate as collateral, it is an unfortunate reality that lenders will give a lower valuation of the property-a property with a certain market rate may be valued lower by the lender so they can sell it at a throwaway price in case the borrower doesn't pay. Additionally, the borrower gets a lower amount of the loan than what they ideally should have received.

When a flailing company is looking for options to get cash quickly, it may be in their best interest to consult an experienced attorney, especially if one is considering asset-based lending. An experienced attorney can try to ensure that the borrower's interests are protected by getting a fair valuation of the real-estate and that the terms of the agreement are fair as well.

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