As a business owner, you don’t always have the funds you need when you want to grow. Whether you need to buy more equipment, expand your facility, or increase your inventory, it’s going to take a certain amount of money to accomplish these goals. With help from asset-based lending, you can get the money you need to take your business to the next level. If you’ve never considered asset-based lending, our team at NTIB Finance & Consulting has created a beginner’s guide to help you get started.
What is asset-based lending?
It’s not uncommon for a lender to require some form of collateral when you’re applying for a loan or line of credit. Rather than taking out a loan using your title on your vehicle or a second mortgage on your home, you can use your business assets to secure your loan. Your assets can be anything from property to inventory to receivables.
If you’re looking to invest in yourself and grow your business, you can qualify for a line of credit that you can use over and over again. Your line of credit will function like a cash reserve that you pay off over an established period of time. Having a line of credit that’s secured by your assets is a great way to have funds available when you need them rather than continually applying for loans. This is similar to having a business credit card but generally much larger lines of credit.
What is an asset-based lender?
Asset-based lenders or ABL lenders provide loans to businesses with money against business assets. Traditional lenders can take several weeks to months to approve a loan, which can be a problem when you need funding for your business. Your eligibility for loans is determined by the assets that qualify based on the lenders criteria that you currently hold in your business. Some ABL loans are set for a specific time period – generally 2 to 5 years or as a continuing line of credit that varies based on a borrowing base. The borrowing base is the underlying assets that may fluctuate over time – like your receivables. You can work with your lender to decide which is best for you and your business.
What are some pros and cons?
Most types of funding are going to come with pros and cons, and asset-based lending is no different. We can help you weigh your options as you decide whether a loan is right for you.
One of the biggest benefits of working with an asset-based lender is that you get money relatively quickly when you need it. You don’t always have time to wait for a business loan to get approved. Asset-based lending does come with fees, but you won’t be paying a high interest rate or the same high fees that come with factoring. It’s a solid alternative to other traditional types of financing.
You need to be careful with how much you finance with an asset-based loan. Larger loans can have strict requirements that might open you up to lender audits or other scrutiny you might not be prepared for. Like all loans the borrowing rate will be effected by your businesses financial condition and sometimes the owners personal credit.
Schedule a free consultation
You can learn more about asset-based lending by getting in touch with us at NTIB Finance & Consulting. We offer lending for small businesses that are looking to grow but don’t have the capital to do so right away. Schedule a free consultation with a member of our team today by calling 914-419-3059 or sending a message using our contact form.
We look forward to talking with you about our available solutions for small business financing.