When your company credit makes it impossible to get a loan from a traditional lender you might turn to an asset based lender. However, working with this type of institution can pose unique challenges. Here are three tips for getting the best out of asset based loans.
Select a Sympathetic Lender
One of the best things you can do is to choose a lender that understands your situation. Generally, this will be a company that also began as a small business or has extensive ties to the small business community in your area. These lenders are more likely to sympathize with your circumstances and may even be a bit lenient on some of the credit requirements, particularly if they get to know you well.
Establish a Long-Term Lending Relationship
Even though you might not want to work with an asset based lender once you need that kind of assistance you'll probably need it for some time. With that in mind, don't try to con your lender by making up excuses for late payments or slow business profits. Be as honest and forthright as you possibly can. If you decided to work with a company that is sympathetic to the unique challenges of small business owners, your lender will understand your problems.
It's also important that you keep the future in mind as you work with your lender. If you end your current agreement on a sour note due to missed payments or lack of communication, you'll likely run into trouble if you need to request another loan in the future. No matter how difficult your current situation may be remember that how you conduct your business now will affect the future assistance you may need.
Be Reasonable in Your Expectations
As mentioned earlier, working with an asset based lender will require you to open up your books in ways you might not like. If you operate a resale business you'll have to provide proof of your current inventory levels. If you provide a service you'll likely have to offer documentation that supports your monthly income and expenses. You may also have to continue reporting these figures so the lender can see if there are any possible problems on the horizon.
Working with an asset based lender doesn't have to be difficult. By taking advantage of these suggestions you'll be able to navigate your relationship with few problems.
