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Is Asset-Based Lending Regulated?

Updated: Feb 9

One of the questions that some first-time real estate investors might ask is whether or not asset-based loans are regulated by a governmental body. It makes sense to wonder about the extent to which you are allowed to receive financial aid for the purpose of growing one’s equity and private wealth through real estate investment. Well, long story short, asset-based loans are not strictly regulated by the government, meaning you have the freedom and the opportunity to invest in as much real estate as you want. However, it might be important to know what you can and cannot do with asset-based loans.

Overall, there are not many restrictions against asset-based loans that you need to be worried about. The primary guideline is that asset-based loans must be in support of a business and a legitimate venture. For those looking at real estate, it would be in your best interest to work with an expert and professional private lender who is very skilled and knowledgeable in their craft and knows what they are doing. Generally speaking, a real estate asset-based loan would never have a reason to be suspicious in the eyes of the law unless the certain details about the property, the lender, the borrower, or the loan package are purposefully incorrect to assume fraudulent equity gains. Most of that should go without being said, but it is worth highlighting the importance of working with a legitimate professional as they will always provide the best investment services in the industry.

So, unless you are doing something blatantly wrong or fraudulent, there is really nothing to be concerned about when it comes to applying for an asset-based loan. As mentioned earlier, it is a perfectly legitimate business practice that goes mostly unregulated by the government, meaning you are free to apply for as many asset-based loans as you desire and do whatever you want with them. But why might you want to get an asset-based loan? What are some of the benefits offered by this particular loan package?

For starters, an asset-based loan is a form of financing that chooses a type of asset, in this case a plot of land or a piece of property, to serve as a form of direct collateral of the lender in the event that the borrower is unsuccessful in their investment attempts or unable to pay back their lender in the agreed upon fashion. There are a lot of benefits to an asset-based loan, especially in relation to other types of real estate investment loans. For instance, it is much easier to get an asset-based loan than some other types of loan packages as the property serves as a form of secured collateral to which the lenders can then tie their risk to. As a result, the process is much less strict and you don’t have to worry about signing guaranteed statements or providing an endless array of financial records to your lender to demonstrate reliability against risk. Additionally, there is more flexibility to be had with an asset-based loan as you can do whatever you desire to improve the equitable value of the property. This also puts greater emphasis on the property itself as you are more motivated to preserve the property and its quality during the process as well as use it to leverage for even more equity gains. Lastly, because asset-based loans secure themselves to a form of collateral, there is slightly less risk involved for the lender, meaning they can introduce lower costs and interest rates to the equation.

Final Thoughts: Is Asset-Based Lending Regulated?

All in all, there are many opportunities to be had with an asset-based loan as there is no strict form of regulation keeping it at bay. As long as you work hard as a borrower to ensure the sanctity of the property, you will see great equitable heights.

For more information on asset-based lending, visit Stratton Equities today.

Is Asset-Based Lending Regulated answered by Stratton Equities


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