Asset-based lending is just what it sounds like, a loan which has the security of collateral which is provided by the borrower, and which tends to reduce the need for a long credit history or a perfect credit score.
In many cases, the asset involves your company invoices, since they represent uncollected cash from customers, and are considered to be solid assets. Companies which take out asset-based loans are often thinking in terms of future company growth, and the in-hand cash which is received from an asset-based loan, can definitely help fuel company expansion.
Securing an asset-based loan
It’s generally fairly easy to secure an asset-based loan, because the collateral provides surety to the lender. Still, your company will need to have customers who pay their bills promptly, it must have good reporting systems, its financial statements must be in good order, and you must have inventory which is commonly sold. By providing your prospective lender with detailed financial information, even a fairly new company can qualify for asset-based lending.
Advantages of asset-based lending
Asset-based loans can deliver a critical source of funding for companies which may be highly leveraged, under-funded, or which are experiencing rapid growth. Many companies also use the funds from an asset-based loan to get past a down period in sales. Asset-based lending is particularly appropriate for distributors, manufacturers, and service companies, many of which have seasonal needs or industry cycles which create intermittent cash flow. One of the best uses for asset-based lending is to use the funding to acquire another company, so as to achieve rapid growth in a short period of time.
Would asset-based lending help your company?
As asset-based loan is often easier to arrange, because of the build-in collateral provided by your asset. Contact us at Elevation Financial to find out more about asset-based loans, or to apply for one which can significantly help your small business.