How Asset-Based Lending Can Accelerate Your Business
Often businesses require additional working capital to maintain current operations or stimulate growth. One solution to this dilemma is asset-based lending. In this form of financing, you use inventory, equipment, accounts receivable, and other company assets as collateral to secure loans. The borrowing base becomes a percentage of the value of the assets accepted as collateral. Here are some things to keep in mind when determining if asset-based lending is the right answer for your business.
Improve Cash Flow
One of the primary advantages of asset-based lending is its ability to boost company cash flow. Whether your cash flow difficulties stem from slow-paying clients, an off-season slump in revenue, or rapid growth, asset-based lending helps you expediently obtain the funds that you need to maintain a steady flow of working capital.
Asset-based loans are easier to qualify for than conventional bank loans or lines of credit. As long as your company can document acceptable financial controls and inherent profitability, your main qualifications are the assets that can be leveraged as collateral. The assets that are easiest to use and secure the broadest borrowing base are accounts receivables from commercial clients with good credit.
If your company qualifies for asset-based loans, you can generally obtain them more quickly than traditional loans and lines of credit. In most situations, you can have the working capital that you need within a few weeks.
Traditional lenders often place elaborate restrictions on how you can use the funds you borrow. When you use asset-based lending, you have greater flexibility in how you use the money as long as it benefits your business. Additionally, as your company continues to grow and your accounts receivables increase, your financing line can increase as well, stimulating further growth.
For more advice on growing your business through asset-based lending, get in touch with Uraeus Capital Funding.