Asset-based lending has come a long way in recent years. A wide range of financial service companies now offer short-term credit to individuals and businesses interested in securing loans with collateral. This includes conventional banks, pawn brokers, and private asset-based lending companies. For anyone interested in exploring this financing source, the key is finding lenders willing to offer this type of credit based on your collateral while offering the most favorable loan terms possible. 

Figuring out the right lending company to borrow from can be a little tricky, especially since the industry isn’t as regulated as traditional credit-based financing. However, with some digging and sufficient knowledge, you can find a good asset-based lending company that will grant you the money you need under the best conditions. This guide explores the process of choosing the right asset-based lending company, focusing on the top features and factors to consider in making your decision.  

Experience 

Generally, you are more likely to get the best loan terms from lending companies with significant experience. These companies understand the risks of the industry, know how to value collateral assets properly, and can better navigate the challenges of the industry. They make better financing partners than newer companies with limited experience. To improve your chances of getting a deal that meets your needs, research the lending company and look for how much experience they have. 

Reputation 

The company’s reputation is one of the most critical factors to consider when evaluating lending companies with which to partner. A company with a history of underhanded practices or complaints from previous clients will likely give you issues, too. This is why researching the company’s reputation is important. 

Top performers in the lending industry try to stay above board as much as possible. This means securing licenses from the relevant authority and maintaining client satisfaction. You can also consider the company’s partnerships and affiliations. A reputable company won’t have difficulty partnering with other notable names within and outside the lending industry. Where possible, read real third-party reviews to get an idea of your experience with the company. 

Does the company support your asset? 

Lending companies focus on specific asset classes instead of just giving money to anyone who applies. Focusing on one type of asset allows the company to develop expertise in appraising and liquidating that specific asset if needed. While some companies only accept conventional properties like real estate or cars, many asset-based lenders now support new asset classes, including luxury goods like wristwatches, jewelry, and artwork.

In applying for an asset-backed loan, you must find a lender willing to accept your asset. Familiarity with your asset will increase your chances of getting sufficient capital and the most favorable terms.

You also need to consider the lender’s valuation practices. This refers to how the company determines the value of your asset and how much loan you’ll be able to get with it. With luxury asset loans secured with wrist watches or jewelry, you must ship the asset to the lending company for appraisal. You should determine if the process offered by the company is suitable for you. Finally, confirm if the lender enlists the services of appraisal experts to evaluate your application. This ensures that you’re getting the true value of your asset as a collateral loan. 

Seamless lending process 

One of the qualities of asset-backed lending is that it is relatively easy to access. This is an important factor, especially if you need short-term credit approved as soon as possible. 

The top asset based lending companies in the industry are renowned for their tendency to speed up the application process (without rushing it). For asset-based lending, this means providing an online application portal so that the process can be initiated and completed without needing a physical office visit. The best lending companies also provide a seamless process for asset verification, which may include secure and efficient shipping of your asset for physical appraisal. 

Once the value of the asset is determined, an offer is prepared and sent right away. Some of the best companies in the asset-based lending market will disburse the loan directly to the borrower's account within 24 to 48 hours of signing the loan agreement. 

Scale or size of loan 

Consider the scale of the lending company and the size of the loan they’ll be able to provide. Lending companies typically calculate the loan amount they can provide based on the value of your assets. Most lenders will grant between 60% and 80% of your asset’s value as collateral for a loan. However, the maximum loan amount may also be capped at a specific value based on the size of the lending company. 

Before you search for the right lending company, you must be sure of your needs and the specific loan amount that will suit you. This will help you evaluate lenders based on how much they can realistically offer. 

For instance, if the lending company sets a maximum loan amount at $100,000, you will be unable to get more than this figure even if the value of your watch exceeds it significantly. This means the maximum loan you can get from the lender is $100,000, even if you present a $250,000 asset as your loan collateral. If your need exceeds the lender’s maximum loan amount, you must look for another lender with enough funds to support your application. 

The Cost of the loan 

Like other forms of lending, asset-backed lending comes at a cost. Lenders will charge an interest rate on the loan and other expenses like processing, shipping, insurance, and asset storage fees. In evaluating a lending company, you must consider how much getting a loan from the company will cost you. After all, the main reason for applying for a loan is that you’re already short on capital. The last thing you want is to waste money on processing fees and interest. 

The best lending company offers a transparent, free structure with no hidden charges. The loan offer should detail the specific interest you’re expected to pay for the loan and any other extra fees applicable to the transaction. While the interest rate of asset-backed loans is typically higher than that of credit-based loans, it should still be within a reasonable range. Some asset loan companies like AMETA offer interest rates as low as 4%.

Loan structure and other terms 

Top performers in the lending industry offer flexible loan structures characterized by low monthly repayments and extended loan durations. This is necessary to ensure borrowers can repay their debt as conveniently as possible. Before agreeing to a loan offer, you should carefully examine the terms to ensure they’re suitable for you. Some of the most important questions to ask are highlighted below: 

• Will the interest on the loan remain fixed or will it fluctuate based on a benchmark index? 

• How often will payment be made (weekly, monthly, or quarterly)? 

• Will you have to pay a penalty for early repayment? If there is a prepayment penalty, how is it calculated, and how much would it be?

• What are the collateral requirements? 

• What constitutes a default, and what options do you have in case of a default? 

• How will the loan be disbursed, and how will repayment be made? 

These are some of the most important questions in examining the loan structure and general terms. A good lending company will offer a flexible loan structure with good terms that make it easy to repay the loan without over-stretching your finances. 

Conclusion 

Choosing the right asset-based lending company is as important as the loan application. This is not just about finding someone to provide the short-term credit you need. It’s a strategic decision that may significantly impact your finances in the near or distant future. This is why you must ensure you’re partnering with a reputable company offering the most flexible and profitable solution. Finding a lender that checks all the boxes might require you to shop around a bit. However, putting in the effort to choose a suitable lending company comes with several benefits in the long run.