Posted by Lack of funding for inventory expansions or growth opportunities can hinder your progress and success. If you’re looking for financing solutions, consider the merits of asset-based lending. The funding allows businesses to leverage assets as collateral against a loan agreement. Read on if this sounds like the ideal solution for your funding problems.
What is Asset-Based Lending?
Asset-based lending (ABL) is financing which uses assets owned by a company as collateral for loans, which include accounts receivable, inventory, equipment or real estate as the loan collateral. ABL funding places a premium on creditworthiness and bases loan amounts on the value of collateral being pledged as security.
What are the Steps to Getting an AB Loan?
Asset-based lending from companies that offer services, such as factoring invoices, typically involves three steps.
- Application: Businesses apply for a loan from an asset-based lending company by filling out an application with information about their assets and finances.
- Due Diligence: Before providing asset-based lending solutions, an asset-based lending company will conduct due diligence on both the assets being pledged as collateral and their owner to assess value and creditworthiness.
- Loan Offer: After performing thorough due diligence, an asset-based lending company will provide a loan offer that details loan amount, interest rate and terms.
- Collateral Verification: Once the company has accepted the loan offer, an asset-based lending company verifies all assets offered as collateral.
- Disbursement: After verification, the company sends the funds quickly so your business can use them to cover daily operations.
Is ABL the Solution Your Business Needs?
Asset-based lending is the perfect financing solution for businesses that:
- Has significant assets but struggles to secure traditional loans due to creditworthiness issues or lacking collateral.
- Has the assets and needs financing for growth
- Has the assets and requires a working capital
Advantages of Asset-Based Funding
- Flexible Loan Amounts: Loan amounts can be determined based on the value of assets pledged as collateral – which may prove invaluable for businesses with a significant asset base.
- Quick Access to Funds: Asset-based lending can offer businesses fast access to funds, making asset-based lending an essential solution when they must respond swiftly to market changes or opportunities.
- No Restrictions on Fund Use: Asset-based lending provides greater flexibility on how funds may be used, unlike traditional loans, which often have restrictions regarding how the money can be spent.
- Improved Cash Flow: Asset-based lending can help businesses improve their cash flow by providing access to capital that they can use for bills, inventory purchases or covering other expenses.
Acquiring AB Funding
Asset-based lending may provide an ideal financing solution for businesses with assets that qualify but have difficulty accessing traditional loans. The fast distribution of the funds is another advantage. Take your time evaluating this funding solution for your business, carefully considering its advantages and disadvantages before making a decision. Asset-based lending could be just the answer to meet all your financial needs if it fits all the boxes on your checklist. Investigate more options available before making your final choice. Consult experts about funding solutions if necessary.