The Biggest Benefits of Asset Based Lending
In recent years, asset based lending has been gaining popularity. These loans offer several advantages, similar to lines of credit, however, qualifying of this loan is easier. Keep reading to learn about the specific benefits of these loans here.
Increased Liquidity
A crucial benefit offered by asset based financing is improved liquidity for a business. When used properly, this helps with predictable cash flow and stability. With this benefit, it is possible for a business to stabilize their operations that may be growing quickly or that have tight cash flows, or that are dealing with seasonal revenues.
Easier to be Approved for Than Lines of Credit
Qualifying for asset based financing programs is much easier than qualifying for business lines of credit. To be approved, your business needs a limited track record of profitability along with some established financial controls. Besides that, the most important requirement is having assets to leverage.
Leveraging accounts receivable is the easiest and most effective option. With invoices from creditworthy commercial clients, a business has an acceptable form of collateral. In fact, it is these invoices that can be turned into operating cash. Usually, finance companies will want to provide financing for shorter-term invoices; however, this isn’t always the case. Other types of collateral that can be used with this lending option include equipment and inventory.
A More Flexible Financing Option
Most asset based financing lenders offer a high level of flexibility. Typically, there aren’t many restrictions regarding how you spend the money. The stipulation is that you use the funds for business purposes.
The financing funds that you receive will be tied to the actual value of your accounts receivable along with your other collateral. What this means is that the line will continue to grow as sales go up. Usually, an increase in the amount of financing you receive will be approved quickly. You don’t have to go through the underwriting process each time you need an increase. As a result, as your company grows quickly, so can the funds you have access to.
When it comes to ensuring that you get the financing needed to help grow your business, there are several factors to keep in mind. The information here helps you see while asset based lending may be a smart option for your business and your needs. Be sure to find a quality lender, as they will help ensure you get the desired results from the loan that you receive.
