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How to Get a Business Property Loan Without a Bank

Business property can be anything from commercial real estate to other assets owned by the company. Obtaining the capital needed to expand, reinvent or start a business from a bank requires good personal and business credit in most cases.

Banks also require most companies to show long-term financial history, something many small businesses don’t have in the beginning or expansion phases. For banks, business property loans are all about your current financial condition.

Asset based lenders provide growing companies with more unconventional business funding options. Instead of focusing on your financial history, these lenders provide property loans to businesses based on the current financial condition of the brand and the value of its assets.

They place emphasis on the underlying collateral, looking closely at its current performance and ability to sustain over time. For these lenders, collateral can come in many unconventional forms, giving small-to-medium sized businesses more funding options.

Unlike traditional lending, asset based loans are less complicated. Instead of waiting several months for an approval, your capital can be available within weeks.

Business Property Loans: Banks VS Asset Based Lenders

There are many reasons why small business owners seek loans to start or grow their brands. Some need commercial real estate loans to build, improve or expand their physical locations. Others require funding to buy other types of property such as operational equipment, goods for sale, and equipment needed to complete contracts and projects, etc…

In all cases, these companies need access to cash for business-related reasons. But for many small businesses, getting a loan from a bank just isn’t an option. Each owner’s situation is unique but most of the time, many just can’t meet a banks strict requirements.

They require proof of disposable funds you may or may not have access to at the time of the application. Your cash flow is examined closely. If it doesn’t meet certain requirements, the bank will not approve you for the business property loan.

With asset based lending, the individual situation is examined with emphasis on the underlying equity of your collatoral. That means the growing restaurant’s application will be reviewed differently than the real estate developer attempting to fund the building of an upcoming housing community.

Even if you have little money in the bank, you can still qualify for a business loan to help you finance the following to nurture your company’s growth:

  • Retail, industrial, office property
  • Medical business equipment
  • Multi-unit real estate
  • Purchase business equipment
  • Debt refinancing
  • Buy business-related inventory
  • Hire contractors and staff
  • Reinvest in operational needs
  • Stabilize cash flow
  • Establish capital for upcoming opportunities 

How Does Asset Based Lending Work?

Unlike banks, asset based lenders consider your accounts receivable sufficient capital for securing financing for small-to-medium sized businesses. No other collateral is required.

The accounts receivable loan is written up as a revolving line of credit for your business. That way, you can withdraw funds only when you need them. And, these asset-based loans come with no prepayment penalties, so you can save money on interest fees by paying off the debt early.

There are some requirements. You must make a pledge to conserve debt throughout the life of the loan. Businesses must submit monthly financial statements showing there are resources coming in to repay the line of credit.

3 Common Reason Owners Seek Business Property Loans

Every small-to-medium sized business owner’s specific reason for seeking funding is different. Most times, they have no access to cash to nurture the current needs of the business. These are three common reasons many owners decide getting a small business loan is the key to success:

1. Lack of Resources Stunting Business Growth

Sadly, many start-ups are funded completely out of the pockets of the owners. That means you have limited resources to grow the company in the right direction. Overtime, those resources dry up and you’re left struggling to keep the business afloat.

And the larger the company is, the more capital it needs to thrive. Business property loans provide the extra capital needed to give the business a boost. For these companies, small business financing can supply various needs:

  • Restock inventory
  • Operational costs
  • Expand location(s)
  • Hire employees and contractors
  • Pay off vendors

2. You Co-Mingled Business and Personal Funds

This is one of the most common financial mistakes start-ups and other small business owners make. Finance professionals always recommend never mixing your personal finances with your business finances… ever!

However, like most small business owners starting out as new entrepreneurs, this may be the only way to get the company started. But there are ways to handle this situation, so things aren’t so complicated later on down the line.

You must determine how much of your personal funds should be dedicated to growing the business, and how much needs to go toward your personal bills and expenses. It’s also wise to always have separate personal and business bank accounts.

Make sure all accounts receivable go through the company account. Then, instead of paying your personal expenses from there, pay yourself a salary when needed. Keep that salary in your private account to pay bills unrelated to the business.

Just be very careful to never allow the business bank account to hit a negative balance. Banks and lenders don’t like seeing those dreaded “NSF” charges on bank statements. It’s best to have no less than a couple thousand dollars in the company’s checking account at all times for emergencies and rainy days.

Asset based loans provide you with access to capital when you need it via accounts receivable financing. Using a revolving line of credit for your business, your bank account never dips below zero. And you only pay for it if and when you use it.

3. You’re Waiting for a Big Payment

Businesses that depend on contracts to survive financially have unique financing needs. These B2B companies invest a lot of time and money into starting and completing projects. Yet, they can’t bill their clients until the projects are complete. And even then, some clients are simply slow to pay.

One prime example is the construction industry. Commercial real estate developers, investors, flippers, brokers, owners and builders spend weeks… months… getting their building projects off the ground.

Even before the billing begins, there are numerous needs that must be met to complete a construction project, such as:

  • Buying materials
  • Zoning and planning costs
  • Hiring staff
  • Paying contractors
  • Operational costs
  • Leasing equipment
  • Paying vendors
  • Other accounts payable

Sometimes, waiting months to get paid is not an option. Along with the costs above, many contractors already have new jobs lined up before completing the last one. Where will you get the funds needed to start the next project if you’re waiting for clients to pay off your accounts receivable invoices?

That’s where invoice financing comes into play. Asset based lending provides you with an active business line of credit for times like this. Use the accounts receivable loan to pay off debt related to the current project, while funding the start of the new one. That way, your business continues to grow, even though client invoices are still outstanding.

5 Types of Asset Based Loans for Businesses

Accounts receivable financing allows you to use unpaid client invoices as “collateral” or security for a business property loan. Asset based lenders issues businesses revolving lines of credit to pay off debts as well as grow the brand.

Here are five common types of asset based loans for small-to-medium sized businesses:

1. Inventory Financing

What is inventory financing? It’s a business loan package created to help companies grow their inventory. This may be inventory needed to produce products, provide services or for daily operations. It’s commonly structured as either a revolving line of credit or in the form of a loan.

2. Luxury Asset Loans

What is a luxury asset loan? This is a loan that’s physically secured by a high-end asset, such as diamonds, expensive artwork or vintage cars, until the debt is paid in full. An asset based lender requires that the property be stored in their secured, insured location throughout the life of the loan.

3. Accounts Receivable Financing

What is accounts receivable financing? This is a revolving line of credit granted to a business based on unpaid client invoices. There’s no collateral needed for these business property loans. However, your accounts receivable unpaid invoices are used to secure the debt. Oftentimes, you can borrow up to 90% of the invoice value.

4. Equipment Financing

What is equipment financing? This is a loan provided to help businesses buy equipment needed to grow financially. This could be anything from commercial vehicles to construction equipment, from office furniture to operational equipment. For construction entrepreneurs and contracting business owners, this commercial loan gets companies the equipment needed to complete building and development project without unnecessary production delays.

5. Property Financing

What is property financing? For real estate builders, developers, contractors, investors and flippers, it’s a funding tool used to buy, develop and/or build property. Commercial real estate owners also seek property financing to expand their industrial, retail and office spaces.

These loans may be used to buy, renovate, construct or develop just about any type of commercial real estate, including industrial, office, professional, retail and multi-unit investment property.

How to Get Immediate Cash for Your Business Property Venture

What Is Invoice Financing?

Invoice financing is an effective financial tool for small-to-medium sized businesses that need funds fast. Your asset based lender will evaluate the merit of the invoiced company and make a loan for up to 90% of the value of the unpaid invoice. When the client makes the final payment, you get the other 10%, minus fees.

This process is called invoice factoring. It eases your burdens by giving the lender the responsibility of sending statements, tracking payments and reporting the customer to collections if needed. There are two benefits to using invoice financing for entrepreneurs and small business owners:

Time Well Spent – You spend more time securing new business and projects, taking care of your customers and producing quality products and services instead of worrying about accounts receivable paperwork and collections.

Cash When You Need It – Never turn away the opportunity to take on a new project or client because you didn’t have access to the cash needed for contractors, employees, equipment, inventory, etc… Your revolving line of credit is available when you need it.

What Is Purchase Order Financing?

Many commercial real estate and other business projects require purchase orders. These are official letters a buyer gives to your company formalizing the products or services needed, quantities required and the agreed upon pricing.

Oftentimes, businesses deliver solutions to customers without pre-payment. Some clients take longer to pay than others. With a purchase order loan, this contract becomes capital to secure this type of asset based financing so you can use the money now… when you need it.

The creditworthiness, financial health and strength of the customer that issued you the purchase order is weighed for this small business loan. That means your business can get funding based on the strength of your client’s merit as a business.

Purchase order financing is a very effective business funding tool for owners who don’t have good credit, as well as startups with no credit history at all.

What Is Import-Export Financing?

This business property financing solution is used to help companies purchase goods that will be imported and/or exported to and from the United States. The capital is used to buy the goods, as well as cover the import costs of bringing them to the US and/or export costs of exporting them to another country.

Import Financing

This small business funding tool allows you to purchase goods needed to grow your business. These may be products you’re purchasing for resell or those needed for operations or production. Getting items through customs and dealing with other import complications and delays means stopping your company’s cash flow. This loan helps you stay afloat until the goods arrive at your doorstep.

Export Financing

Overseas transactions can come with multiple threats and holdups related to customs and shipping issues. That means you customers may have to wait longer than expected to receive your goods, delaying the invoicing process even longer. This small-to-medium based business funding option turns these overseas purchase orders into working capital for your business right now… when you need it most.

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