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Business Term/Asset Based Loans


Asset loans are loans that are given against an asset in business. Many businesses will often find themselves in need of short term loans form banks. There are many loans that businesses have access to in Canada. These loans are used for a number of reasons and the one a business picks will depend on this reason. Some of these reasons will include the credit situation of the company, whether the company or business is servicing another loan and so on.

The asset based loans are different from any other traditional loans in Canada. The traditional loans will consider the mode of payments before considering the collateral that the company or business is offering. The asset based loans are the complete opposite of that. This is whereby the lenders will consider the collateral before considering the ability of the clients to repay the loan. The business term loans allow the business to get out of a number of situations as long as it has an asset.

Some of the conditions that come with these loans include the Loan asset vale. The value of the asset should be higher than the amount borrowed by the business. This means that if the asset is valued at $1,000,000, the loan given will be valued at about $500, 000. This protects the lender in case the borrower is unable to pay the loan. There are other smaller policies that will govern these loans depending on the lender. These include the rates and the terms of payment. The fact is that the loans are given for short period of times. They are not to be confused with bridging loans however. They can still be used for the same purpose all the same. These loans are commonly used in the real estate business to purchase.

The mode of payment is agreed on by the two parties depending on the needs of the business. The agreement drawn between the lender and the borrower is bound by law. There are cases where the asset is devalued with time which can be a problem. The lender can only sue the borrower for the remainder of the money is the lender believes that the borrower is able to raise the rest of it, or if the lender believes that the asset in question is able to raise the rest of it. These loans are important for turnarounds, reinvesting in terms of capital and bridging a financial period.