Unique Benefits of Asset Based Loans
May 03, 2017
Prime commercial real estate and the development of land doesn’t just sit around. If the word leaks out about the property you are interested in then, you want the cash in hand to purchase the land and buildings up today. Getting a traditional commercial loan can be a hassle, especially for those working in the real estate industry. You want to purchase the land, build on it, and sell it out as quickly as possible while making the most profits. It is during this time when asset based loans are the best alternative.
Benefits of Asset Based Loans
Asset based loans are loans that are given to commercial businesses, real estate developers and investors, which are backed by the value of the underlying asset(s) offered as security. These loans differ from traditional commercial loans because they are granted in exchange for an asset — such as real estate property bridge loans. These non-traditional loans often become ideal substitutes because the commercial business doesn’t plan to have the loan out for a long term period.
Non-traditional loans like asset based loans are given out by private funding companies such as a bridge loan lender or hard money lender. Unlike a commercial bank lender who looks at the credit history of the company and the company’s financial strength, asset based lenders rely more on the value of the assets given towards the collateral. Unique benefits to these loans include:
The Ability to Borrow More
Often people who seek out non-traditional loans can get a greater loan amount than a traditional commercial bank loan because of the value of the assets.
Credit History is Typically Not a Factor
A bridge loan lender or hard money lender will evaluate the collateral assets to base the loan amount on instead of the company or individuals credit history. This practice works well for new real estate investors or developers who do not have an established credit history or who may have a poor credit score.
Immediate cash on hand
Non-traditional loans usually take less approval time and have a faster fund transfer versus traditional commercial bank loans. While a bank loan could take several months to review your eligibility status, non-traditional loans can take as little as a few days to a few weeks.
Repayment options are Flexible
Many real estate investors will turn to asset based loans when they are in-between the buying and selling of commercial property. They will use the loan to make the next property purchase, building construction and renovations while they are waiting for another property to be sold. The asset based loan amount will be repaid with the sale of the first property.
Selecting asset based loans will allow you to take advantage of this lending avenue when you need funding immediately, but don’t want to carry a long-term loan.
Contact Riverdale Funding if you are interested in hard money commercial loans for your next real estate venture.
This Blog was originally posted on Feb 5, 2015 and updated on May 3, 2016