Collateral based lending lends you money based on the strength of your collateral. Since your collateral offsets the lender’s risk, you can be approved with bad credit and still get REALLY good terms. Common BUSINESS collateral might include account receivables, inventory, and equipment.
With account receivable financing you can secure up to 80% of receivables within 24 hours of approval. You must be in business for at least one year and receivables must be from another business. Rates are commonly 1.25-5%. You can also use your inventory as collateral for financing and secure inventory financing. The minimum inventory loan amount is $150,000 and the general loan to value (cost) is 50%; thus, inventory value would have to be $300,000 to qualify. Rates are normally 2% monthly on the outstanding loan balance. An example is a factory or retail store. With equipment financing lenders will undervalue equipment by possibly up to 50% and work with major equipment only. Lender won’t combine a bunch of small equipment, and first and last month’s payments are required to close. Loan amounts are available typically up to $2 million dollars. Common PERSONAL collateral that can qualify for collateral-based lending might include a 401k and stocks. 401k or IRAs can be used to obtain up to 100% financing and rates are usually less than 3%.A retirement plan is created allowing for investment into the corporation. Funds are rolled over into the new plan. The new plan purchases stock in corporation and holds it. The corporation is debt free and cash rich. With securities based lines of credit you can obtain an advance for up to 70-90% of the value of your stocks and bonds.These work much the same as 401k financing with similar terms and qualifications.