Is Asset Based Lending A Financing Alternative For Your Business?

asset based lending

Asset Based Lending is a general term for business debt financing that uses your business assets as collateral for a loan.  Common types of asset based financing are covered elsewhere on this website.   This type of alternative financing's focus is on the collateral and the liquidity of that collateral as opposed to the cash flow of your business. Typically users of this type of financing will have marginal or inconsistent cash flow.  If your company is rapidly growing and out pacing your cash flow, tapping into the equity in your assets may provide the financing that you need.

How Can You Acquire This Type Of Financing?

This can be accomplished in several ways: accounts receivable financing, factoring, inventory financing and purchase order financing. In all cases some kind of asset is pledged as collateral for the funding that you receive. The tightening of bank credit in recent years has made asset based lending with commercial finance companies a viable alternative to small businesses.

Begin the funding process by filling out the short one-page Initial Business Loan Application here.

You still own your assets when using accounts receivable financing, inventory financing and purchase order financing. The lender will seize these assets should you default on repayment of the loan. When you use factoring to raise working capital, the receivables are actually sold the factor.

Is Asset Based Lending Expensive?

Asset based financing is usually more expensive than a traditional bank loan. If you are like many small business owners, your credit history may have taken some dings recently. This may mean that your friendly banker may not be so friendly anymore! In such a case asset-based lending may be your solution, despite the increased cost of the loan. You can usually get the cash that you need much quicker with an asset-based loan than a traditional bank loan. Many of these transactions are closed within a few business days.

The main disadvantage of this type of financing in any of its’ forms is the increased costs that cut into your profits. You will have to make the call if it this kind of transaction makes economic sense for your business.

If your business possesses some kind of assets such as accounts receivables, inventory, a lucrative purchase order from a reliable company or the government, or valuable state-of-the-art equipment, you can very likely find a funding source who will offer you assets-based financing.

Begin the funding process by filling out the short one-page Initial Business Loan Application here.

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