Sifting through loan options as an investor can be challenging. After all, there’s a wide selection to choose from, and it can be difficult to understand which financial backing options are best for you. So, let us help you simplify the process with this quick overview of what you need to know about asset-based real estate loans.
What Is an Asset-Based Real Estate Loan?
Asset-based real estate loans are a type of financial backing best utilized by those interested in business, property, or real estate investment. Unlike more traditional loans, the process of getting approved for asset-based lending can be far less strenuous.
This is because, instead of going through more traditional approval processes, asset-based lenders require that borrowers put their assets up for collateral. And this is how they will collect should the loanee fail to make payments or if they default on their loan. This collateral can include anything from inventory, equipment, or other properties owned by the loanee.
What Are They Used For?
These types of loans are specifically targeted towards small to mid-sized businesses and real estate investors looking for ways to secure funding or lines of credit to meet the monetary demands of their establishment or property. For instance, perhaps you’re interested in purchasing a small apartment complex, and you need to hire contractors and a work crew to start restoring the building.
Well, without the proper funding, adding these people to your payroll will be pretty challenging. However, with an asset-based real estate loan, the funding you need to start work will be in your account, and you’ll have what you need to pay your people right away. For this reason, these loans are attractive to those who need to obtain funding quickly to help make their business or investment property profitable.
What Are the Benefits?
Some of the advantages that come with asset-based real estate loans include spending your funds with more flexibility. With more conventional types of loans, your opportunities to use your money how you see fit are often minimal. But with asset-based lending, the moment the funds hit your account, you can choose to spend them on inventory, marketing, expansion, and any other aspects of your investment you feel could benefit from a little extra cash.
Plus, with this kind of loan, you’re also contributing to your credit portfolio. And especially when it comes to property investment, the more diverse your portfolio is, the more appealing you’ll be to lenders in the future. Further, if you make your payments on time and adhere to the conditions of your loan, your credit score will rise, which can only increase your chances for approval on loans you apply for down the line.
Hopefully, this guide helps you understand what you need to know about asset-based real estate loans. And if you do choose to go with this type of funding, call LJC Financial. We’ll help you get set up with private money lenders in Dallas that can make your investment dreams a reality.