How much value is there in your balance sheet?

It’s an interesting question because many business owners don’t actually know the answer to it. Yes, you can look at the bottom line and see a number that shows you how much equity you have.

But do you know how to actually use that equity to produce cash? 

Keep reading to learn about how you can obtain asset-based commercial real estate loans to fund working capital needs.

1. Know Your Assets

With a traditional commercial loan, the lender focuses more on cash flow and personal financial strength. If you are lacking in either one of these categories, you probably won’t qualify for traditional financing. And this is often the case with businesses that are growing rapidly.

But with asset-based lending, the lender is more concerned with the value of the assets underwriting the loan. Take a hard look at your real estate assets. You can use your personal real estate assets as collateral on commercial loans too. 

Do you have the correct values for those assets? Have you done any improvements to increase value? Maybe the real estate market in your area has improved since you last valued your real estate. 

Once you have a good idea of what your assets are worth, you can look further into asset-based lending.

2. Gather Your Paperwork

It’s important to get your paperwork together before you talk with your lender. The more information you give them, the better they can determine how much you qualify for based on the value of your assets. 

Bring in an old appraisal or consider ordering a new appraisal on the property. This saves time and paperwork. And it will give the lender the best idea of how much your real estate is worth. 

If the property is a rental, bring in copies of signed lease agreements to show proof of the property income. Be prepared to show proof that you have a clear title to the property. And it never hurts to bring in tax returns and business financials to support your request.

3. Come Up with a Plan

Now that you have your paperwork in order and you have an idea of what your assets are worth, come up with a plan. Figure out how much money you need from this transaction. And make a plan to repay the funds.

The repayment plan depends on the type of commercial property. A rental property will generate its own cash flow and can cover a regular principal and interest payment. A term loan would work for this type of property. 

An investment property that you intend to sell in the future will need to be funded through the operating income of your business. This might work best as collateral on a short-term, interest-only loan. You pay interest on the funds until the property sells and you pay the loan in full.

4. Talk to Your Lender

Now that you have a plan, it’s time to talk to your lender. Depending on the equity you have in your assets, you might qualify for more than you originally planned. Your lender looks at the paperwork you’ve gathered and can give you a better idea of what you qualify for. 

Every lender has different requirements for paperwork. Your lender will let you know if you need to bring in anything additional, like personal tax returns or a business plan. And they’ll give you a full rundown of what you can expect through the loan process.

Are You a Candidate for Asset-Based Commercial Real Estate Loans?

If you own real estate, you’re likely a candidate for asset-based commercial real estate loans. And that’s a good thing! Because asset-based lending is usually quicker and easier than traditional financing. 

At Capital Collaboration, we know asset-based lending. We can help you leverage your assets to your advantage. Contact us today to talk to one of our dedicated lending specialists!