Improve Your Cash Flow with Asset-Based Lending
When you are looking for a way to get access to working capital, asset-based lending can be a good option. This type of loan uses your equipment, accounts receivable or even inventory as collateral. This is most often used by established companies which have a record of internal workings and can be for a term of between six months and two years.
What Can Be Used?
Asset-based lending can use more than just your building and land for collateral. If you have seasonal product that tends to sit around for six or more months, holiday decorations for example, then you can us it for more than just keeping your warehouse shelving from flying away. You can use it as collateral for a loan and get working capital you need to drive other sales. You can also use invoices or accounts receivable as collateral or the equipment you use on a daily basis. As long as the lender can value and track the asset, it can be used as collateral.
Why Should You Use It?
Not all reasons for taking out a loan are good ones. So the better your reasons are, the better the terms of lending will be for your company. For instance, if you are in a borrowing and repayment cycle where you need to borrow more money to pay back loans you already have, then chances are that new lending will not actually be helpful in the long run. However, if you are doing well and just need a bit of extra to expand operations, then using your assets as collateral can be the best way to get what you need.
This type of lending can also be good for your business if you do not quite meet the requirements for a traditional bank loan. For instance, if you have plenty of equipment, but have not been in business long enough to establish a credit history, then using that equipment as collateral can help you get the funds that you need as well as help establish your credit with the bureaus.
Asset-based lending can help you improve your cash flow by putting the things you own to work for you. You can use everything from your buildings and land to your unsold product for a loan lasting between six and twenty-four months to even out seasonal bumps in cash flow or to even expand your company. In this type of lending, your assets are used as collateral and will be evaluated by the lender.