How to Use an Asset With a Lien to Get a Business Loan

Do you want to get a business loan using assets with a lien?

How to unlock your Assets!  Here are 3 ways to use an asset that has a loan on it now as collateral for a new business loan.

Apply below:  Expert programs that include guidance getting the maximum out of your collateral.   Even if you still owe on it right now!

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1. Request a lien release. 
2. Lender takes a 2nd lien position
3. Payoff the lien with proceeds. 

3 Ways to use an asset with a loan on it as collateral for a new loan. 

1. Ask for a release of lien:

Call the existing lien holder and ask them to release the UCC lien.   Read here for more about what UCC Liens are.    Lenders often take much more collateral than they need because they want to cover any losses on defaults.  They sometimes even take all of a business’ assets instead of only they need.  They over collateralize the loan and improve their loan to value position.  Most borrowers think that is only way it will be and do not object.   The lender wins by default just by asking for more than they deserve.   

The lender may agree to release a certain piece or more of the collateral they are holding.  This works best when they have many pieces of collateral and you have already paid a lot of the loan down with timely payments. 

Push the lender hard on loans you have paid down significantly as agreed.   

Negotiation Example:  2 years ago, you took out a 4 year business loan for $100,000 and your current balance is $40,000.   The lender took 4 pieces of construction equipment worth $25,000 each and all payments have been on time. 

Telling the loan company they still have enough collateral  and maybe more than when the loan was originally closed.

The loan to value, LTV, may now be lower than when the loan closed.    In those cases, you have paid the loan loan down faster than the equipment depreciated during that time.

If they agree, follow up to verify your asset has been released at the Secretary of State, also known as the SOS.    Push hard to get a release as you may need the extra collateral, especially for a larger business loan.

2. New lender takes a second position. 

They can take a 2nd position lien on the collateral.

This works best with real estate that has a lot of equity in it.  The new loan provider can be the 2nd lien holder against the Real Estate.

Example:  A first position lender has a lien on commercial real estate.   The property is worth $500,000 and the current balance is $100,000.   The new lender makes a loan for $50,000 and then takes a 2nd lien on the property behind the 1st lien holder.   2nd and even 3rd positions are usually limited to real estate or cash flow financing.

3. New loan proceeds are used to payoff the loan

The existing loan balance on the asset is paid off.   This happens most often when the balance on the loan is very low.  As part of closing, the 1st lien is paid off and that amount is debited from the proceeds of the new loan. 

For Example:  Your business is closing a loan for $50,000 using equipment as collateral.    There is a first lien holder on the equipment and that loan has a payoff balance of $10,000.  At closing, the new lender sends a check for the payoff amount to the first lien holder and takes a 1st position on the collateral.
 

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FAQ on getting a business loan using assets with a lien .

Can I use equipment with a loan on it as collateral?

Lenders may take a 2nd position on the collateral.  In most cases, they will not make a loan if there is a lien on the asset and it is not paid off.

Do I have to payoff the loan first?

You will have to payoff the loan in many cases.   Some real estate and cash flow loans may not require a payoff of the 1st lien holder.   This will vary by lender depending on their guidelines.

Can a lender payoff the loan on my collateral?

Lenders can payoff the loan on your collateral.   The process is faster when the lender pays off the loan because they will verify and also handle the payoff. 

Can I get a loan before I have the title in hand?

Ask the lender if they are willing to close the loan and request payoff and title from the lender holding the title as part of closing.    You will have to have the title in hand if they are not willing to do that.

Conclusion

Getting a business loan using assets with a lien is possible.

Find out the lender’s requirements early in the process.   If allowed, there may be extra steps that can take a few days.   Start right away and you can close a few days sooner.

Between a release of lien, a 2nd position, or payoff, there are several creative ways you may be able to use collateral that has a loan on it right now to get a new loan.

If not, find out if other lenders have different criteria that will allow you to use encumbered collateral.    Checking into these options often lets borrowers get loans they never would have gotten otherwise.

Asset Based Loan

Asset based loan

Get a business asset based loan for working capital, cash flow, consolidation of other loans, advertising, new employees, inventory, raw materials, expansions, staffing, taxes, equipment acquisition, new markets.    Borrowers can use the funds for any reason.
Get cash against assets (such as real estate, equipment, accounts receivables, and more).  Use this asset based loan to get working capital  you can use in your business immediately.    Use funds to buy equipment and vehicles such as trucks and trailers.

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  • Fast and easy process.   Short online application and closing.
  • Little documentation.
  • Bad credit and tough deals are often approved and closed.

Does my Business Qualify for an Asset Based Loan?

    • Assets are free and clear.
    • Assets are valued at $20,000 or more each.
    • Business is active and generating revenue.
    • If your business has Commercial Real Estate with more than 55% equity,  the
      Real Estate may be eligible to obtain a larger loan.
    • Assets should not have a lien and be free and clear.

What is an asset based loan? 

FAQ’s – Frequently asked questions and requests

Asset based loan options for businesses

“Help me get an asset based loan”

This is a loan that holds the assets of the owner as collateral.   The assets are either Real Estate, Equipment, Accounts Receivables, Stocks and Bonds, Cars and Boats, in addition to Jewelry or other items.   The loan is normally used to get cash or working capital.   A lien is often put on the collateral by the lender.   Once the loan is paid off, ownership goes back to the borrower.  Therefore, the lien process is similar to a traditional car loan at a bank.

Question: “Need an Asset based business loan”.   How can my company get one?
Put together a list of assets your business owns.  Submit the list and determine how much working capital you can get.

Asset based loan for higher amounts: Which are the best choice?

When businesses request funding for higher dollar amounts, they typically consider either an asset based loan or unsecured loan.   Which one is more likely to get the businesses a higher funding amount?  Which financing products should the business apply for?   Choose an asset based loan for higher amounts.

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What is considered a higher loan amount for a business loan request?  Requests over $50,000 are considered larger amounts.   When a request is over approximately $100,000, financials are often required.

For requests over $50,000 to $100,000 and more, it will be easier to qualify through asset based loan programs rather than unsecured programs.

A Business needs to have gross sales over $1,000,000  to be seriously considered for a $100,000 unsecured loan.    They should consider an asset based loan if their sales are less.

There are several asset based loans that businesses can consider.   In general, the most common types are those in which the lender will take a blanket lien on the business.   Traditional banks take a blanket lien most often.   The blanket lien means a lien on all furniture, fixtures and equipment.

Another type of asset based loan is when the company puts up equipment assets.    More asset based financing types include accounts receivables financing, and offering stocks, money market accounts, or  certificates of deposit.

As a result, when a business is requesting over $50,000, they should generally consider asset based loans.