Everything You Need to Know About Asset Based Lending

Working capital is the life’s blood of any company, but figuring out how to keep your cash flow managed so you always have the right balance of available capital and ongoing projects? That can be a real struggle for many small business owners. That’s why you need to understand asset-based lending and its role in your financial management strategy. Unfortunately, there are many myths about asset financing options, which can lead to counterproductive attitudes that shortchange your business.


One of the biggest myths small business owners fall for is the idea that asset financing options are designed for businesses with poor credit. While it’s true that many of them are accessible to companies without established credit or with poor credit, that tends to be a function more of the structure of the financing than the clientele it is meant to appeal to. Like many forms of financing, asset-based options are built to appeal to a wide variety of customers, and those who have good credit will find they can access larger sums far more cost-effectively than if their credit was not as well-established.


Asset-based lending covers a wide range of options, and it uses your company’s assets to fund the cash advance to help control costs. It can include factoring options like accounts receivable financing and purchase order financing. It also covers merchant cash advance services, inventory financing, and any other form of financing that uses your company’s resources to secure the debt. When it comes to assets like your invoices, it’s often possible to access funds no matter what your credit looks like because it is your customer’s chance of default that determines the risk.


Asset-based options are designed for fast approvals and short-term financing, and they come with none of the strings attached that you expect from loans. As a result, the working capital they provide is useful for any operation. Typically, asset financing options are used for cash flow management quite effectively by both large and small companies. They can also free up working capital for large labor and inventory outlays when you expect a big sales opportunity, and for manufacturing companies it can be a great way to get raw materials.


If you’re looking for asset-based lending options that will work for your company, think about your business model and the assets it provides. The best ones to finance will be the ones that fit your business cycle, so you can be assured repayment will be easy.

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