AFG Blog

How to take your business to the next level with short-term asset-backed loans

If you are a business owner that would like to take your business to the next level, short -term asset-backed loans can be an extremely powerful tool you don’t want to forget about. And for you to use it in the most effective way possible, it’s important to know when and how you should make use of it.

Short-term asset-backed loans are typically secured by the borrower’s assets, such as inventory, accounts receivable, or equipment.

How much collateral should you be able to provide for a short-term loan?

A common rule of thumb is to provide collateral of twice the value of the loan when it comes to applying for a short-term loan. Some financing companies in South Africa might even ask for more depending on the project to mitigate their risk on the transaction.

How to use a short-term loan for your business:

  • Capital for business expansion
  • To purchase new equipment for your business
  • Help to complete a business project
  • Invest in other growth initiatives for your business

Advantages of short-term asset-backed loans:

It's easier to obtainable than a traditional bank loan

This is because the loan is secured by the borrower’s assets, enabling the lender to offer more favourable terms and provide the loan in a much shorter time than what you would get from a traditional bank.

You might end up saving costs

Getting your hands on the money much faster than you would from a traditional bank could enable you to take on the high-yielding opportunity or finish the project earlier making you more money or preventing you from losing money.

Gives you more flexibility to respond to changing market conditions

Using a short-term loan for inventory financing, equipment leasing, or financing your working capital could help your business adapt to unforeseen market changes and enable you to afford new business opportunities that may arise. For instance, if your business sees an opportunity to expand, short-term asset-backed loans can provide the financial support needed to do so successfully.

Help businesses during challenging times

During the economic downturn, as the whole world has seen recently, most businesses will most likely see a decline in revenue, which will make it much more difficult to keep up with their financial obligations.

In a situation like this, short-term asset-backed loans can be used as a lifeline, enabling the business to continue operations and keep them afloat until the business has fully recovered.

Conclusion

Short-term asset-backed loans can be used as a valuable tool for businesses that want to grow, expand and ultimately strengthen their financial position.

It’s important to work with a financial company that you can trust and that will keep your business in their best interest.

CorpFin provides businesses with a wide variety of financing products to make sure there’s an option that will fit your business the best.
Visit CorpFin for more information
2023-02-01 12:17