Who Should you Consider Choosing an Asset-Based Business Line of Credit?
Who Should you Consider Choosing an Asset-Based Business Line of Credit?
This kind of line of credit business financing option can streamline your flow of cash and give funds to operate your company and invest in new business opportunities.
Asset-based credit lines are given to companies that require a line of at least $75,000. Because the line of credit is secured by your company’s accounts receivable assets, it should have sales to other commercial companies regarded as those suitable to receive credit. Aside from that, these assets must be unencumbered by some other form of financing; or else, the lender has to be open to subordinate their position on the receivable assets.
The company has to be able to give up-to-date and reliable financial reports. Finally, it has to have a well-established accounts receivable collection process.
For the uninitiated, the term “accounts receivable” refers to the money tied up in invoices. As the name implies, you are yet to receive these invoice amounts from debtors, but AR is shown as a short-term or current asset in the books. This works similarly to accounting for prepaid expenses in the sense that once invoices have been received, they cease to be “receivables”.
