When Should Your Business Turn to Collateral Lending

In Ironwood Insights by

Collateral lending, or asset-based lending, is a type of financing in which the business’ asset/s is being used as collateral. Most providers of collateral lending accept assets such as inventory, equipment, machinery, and accounts receivables. This type of financing approach focuses on the the quality of the asset and not the financial situation of the business, which is what makes it a popular choice for a lot of small to medium sized businesses.

While most businesses, small or large, can find great benefits from collateral lending, a lot of its advantages are well-suited for businesses who are in certain types of situations, industry-wise of or size-wise. Here are some and if any of them resonates with your business, maybe collateral lending is the way to go.

1. You’ve been turned down by traditional lenders because of your credit.

A lot of small to medium sized business owners will not have pristine credit – and if you’re applying for collateral lending, that’s perfectly fine. Lenders typically take more into account the asset being used to secure the loan. Some loans are based on only a single asset, while some work with a combination of them. That is why this type of financing is ideal for businesses owners who have not had much luck with banks because of their credit score.

2. You have an immediate need for cash.

Collateral lending is often used by businesses that are strapped with time and need the money now. Bank loans often take time to get approved and require documents that small businesses might not even have. A great way to remedy that is by applying for a loan that won’t be as tedious and strict, and if you have valuable assets that can be used as collateral, then collateral lending should be in your list of options.

3. You’re in the manufacturing, construction, or service industry.

Business owners in the manufacturing, construction, and service industry often have seasonal needs and cycles that negatively affect their cash flow. Having access to a fairly big amount of cash without the hassle of going through the process of traditional lenders is why collateral lending is well-suited for the seasonal needs of these industries. This way, they’re protecting their cash flow without their work quality getting compromised.

4. You need to free up the cash flow.

Small business owners are well-aware of how much unforeseeable circumstances can greatly affect business. Sometimes, no matter how much preparation you do, something will come up that will need you to use money you had planned to use on something else. Whether it be sudden shortage of cash to pay for suppliers, equipment, or manpower, or a sudden spike in demand that your inventory wasn’t prepared for. In these types of situations, wherein freeing up cash flow will keep your business going, getting financing through your assets will be helpful.

Ironwood Finance offers a collateral lending financing option to make the most out of your business’ assets. The program is designed to help small business owners who have had prior problems with getting traditional funding obtain the money they need to further grow their business. Our program is designed to help get you funding for a wide range of business needs – we can work with titled commercial trucks, trailers, or other heavy equipment, such as excavators, backhoes, or cranes. Apply here.