Many companies have yet to recognize the goldmine that is sitting in their accounting department. While management looks for ways to make payroll each week and pay other operating expenses, customers are waiting as long as possible before paying their invoices. For these companies, asset based lending? is the answer to their cash flow problems.
Why This Type of Lending is Good for Business
Borrowing against your business assets is a great solution when you have financial needs that traditional banks are unable to grant. The process of applying for business loan typically takes more time than you have to wait. Payroll is due Friday. You need to spend money right now to complete a marketing plan that will attract more customers.
This is a flexible solution that gives you greater leverage over what you need to borrow without adding debt. Instead, lenders who offer this financial solution use current assets you own to determine how much you can receive. You never have to borrow more than you need and you use what you already own as collateral.
Generally, you will receive a line of credit based your business’s;
- Accounts receivable
- Equipment and machines
- Material inventory
You get a cost-effective way to raise capital without surrendering equity in your company. ABL allows you to recapitalize, grow, fund payroll and take advantage of supplier discounts when you purchase materials in larger quantities.
How to Get This Financing for Your Business
There are many financial service companies that offer ABL to businesses just like yours when it is needed most. If you have been in business for less than five years, you want to find a reputable company that extends lines of credit to young companies.
Nevertheless, securing this type of financing is comparatively easy. Good reporting systems, inventory that is commonly sold, good financial statements and customers with a positive track record of paying all factor into your eligibility for this type of funding.
Be prepared to present the financial picture of your business. Details and accurate financials are essential to get this funding when you need it most.
Asset-based loans care a much needed capital source for businesses like yours experiencing rapid growth. Sometimes, all it takes is an infusion of cash to help you avoid stalled growth. Clearing that financial hurdle will position your business for a solid future. Not only is this good for daily operational expenses, but you can also use ABL to finance an acquisition.