If you’re a business owner looking for financing, asset-based lending (ABL) may be a good option for you. ABL is a type of business lending that is based on the value of your company’s assets. This can be a great option for businesses that have been turned down for traditional loans, or that need to borrow money quickly.
Here are five things to know about asset-based lending.
Asset-Based Lending is a Fast & Easy Financing Option
One of the biggest advantages of asset-based lending is that it’s a fast and easy financing option. Therefore, if you need to borrow money quickly ABL can be a great option. This type of financing can typically close in 1-2 weeks, much quicker than a traditional bank loan.
The application process is typically much simpler than for traditional loans, and you can often get approved for financing in just a few days. To qualify, your business must have collateral, such as accounts receivable, inventory, real estate, or equipment.
Many business owners will confuse asset-based loans with an accounts receivable factoring program. While the outcome is similar, and both provide access to working capital, they are different.
Asset-Based Lending is a Flexible Financing Option
Another advantage of asset-based lending is that it’s a flexible financing option. This means that you can use the money for any business purpose. The amount of financing also increases as your assets fluctuate. For example, your available borrowing base will increase during busy seasons when your accounts receivables and inventory are at higher levels.
For example, you can use asset-based loans to finance business expansion, equipment purchases, or working capital. You can also use the funds to pay off high-interest debt or take advantage of early payment discounts from suppliers.
Asset-Based Lending is a Good Option for Businesses with Bad Credit
If your business has bad credit, asset-based lending can be a good financing option. This is because ABL is based on the value of your company’s assets, not your credit score.
This means that even if your business has bad credit or no credit, you can still qualify for asset-based financing. However, you will likely pay a higher interest rate than businesses with good credit.
Asset-Based Lending is a Good Option for Businesses with Limited Cash Flow
If your business has limited cash flow, asset-based lending can be a good option. This is because ABL is based on the value of your company’s assets, not only your cash flow. While asset based lenders do prefer positive cash flow, you can still be approved with solid assets and a good business plan.
This means that even if your business has limited cash flow, you can still qualify for asset-based financing. However, you will likely receive a lower advance rate against your inventory.
Asset-Based Lending is a Good Option for Businesses with Seasonal Sales
If your business has seasonal sales, asset-based lending can be a good option. This is because ABL is based on the value of your company’s assets including inventory and accounts receivable, not your sales volume.
This means that even if your business has seasonal sales, you can still qualify for asset-based financing. Asset based lenders will not want to sit on inventory through a slow season, so you can expect a borrowing base that will be paid back during your busy season.