Asset-based lending is one of the best ways for businesses to receive the capital they need. As long as you own valuable collateral, you can qualify. Check out some of the best things about asset-based lending and see if it’s the right move for your business. 

What is asset-based lending? 

Asset-based lending is strictly for businesses and not consumers. It’s when a loan, like a construction equipment loan, is secured with collateral. A business can secure this loan using their inventory, accounts receivable, equipment or some type of other property they own. 

This practice has been around as long as lending has. Another way to think of it is an advance of money based on already existing assets. It is easier to secure a loan this way because lenders have assurance of recouping their loan amount.

It’s not uncommon for new or established businesses to experience cash flow problems due to rapid growth or slow-paying customers. Leveraging an asset-based loan allows businesses the opportunity to unlock cash instantly to cover standard working capital needs or shortages. Asset-based lending can also help secure a construction equipment loan when a business cannot show enough cash flow or cash assets.

When is asset-based lending used? 

  • Fund a growth strategy: You can sustain business growth and expand your company’s products, open new markets and more. Never miss out on a revenue-operating opportunity again. 

  • Cover business expenses: Gain some peace of mind during slow seasons that you will have the cash on hand to cover expenses like payroll and other operating costs. It can also help keep your business on top of rising costs like rent, insurance and more. 

  •  Fill new orders: Even if there are high upfront costs, you can purchase materials  you need to fill incoming orders. 

Benefits of asset-based lending

The biggest benefit that companies can gain from asset-based lending is the overall flexibility granted to them with an asset-based loan. If companies are going through a rough patch, they can use asset-based lending to gain the liquidity they need. The flexibility comes in the form of lenders looking past any credit issues they may have as long as they have a strong asset pool. 

Another benefit that companies gain is being able to more easily secure a larger construction equipment loan. They have the capability to get the maximum amount of proceeds more so than with other types of loans. Plus companies that utilize an asset-based loan tend to develop better practices with cash management and financial reporting. 

Who should use asset-based lending

Any type of company or business can benefit from gaining an asset-based loan, but especially those with assets in their balance sheet. Small or midsize energy companies that are enduring a growth period or in an acquisition mode could also find a lot of benefits with this type of loan. Energy companies that are in need to get cash fast to get a hold of their products while simultaneously investing in alternative resources can seek out an asset-based lending expert like Equify Financial. 

Industry wise: companies in industries that are capital driven will find themselves matching up nicely with an asset-based loan. The stronger the company’s collateral pool, like with construction, energy and transportation companies, the more the business can get out of the loan. 

Transportation companies will find asset-based loans instrumental in helping them to add operational transportation units to their fleets and experience a smooth expansion. Construction companies that experience strong seasonal demands will appreciate the flexibility of an asset-based loan to fund their daily operations all year long. 

Equify Financial 

When times are tough, Equify Financial is there to help your business move forward. We offer asset-based loans nationwide to companies in many different industries. Contact your local representative to learn more.

Contact your local equify financial representative

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