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Asset based lending and growing a business

Sometimes, a business needs extra money in the short-term. This can be used for growing the business, or it could boost cashflow. Often there are invoices, machinery or stock that you can pay for with extra money. Asset-based lending is one of the best solutions for this – below we explore how you can use it to grow your business.

What is asset-based lending?

Asset-based lending helps you to release equity by using your company assets. It works by your business using the assets on the balance sheet as collateral to secure an attractive loan. Lenders will be confident in your ability to repay having investigated your assets and this confidence can allow you to access the higher levels of funding you need to grow your business.

What assets can be used as collateral?

There are plenty of different assets you can list as collateral. Usually, it’s anything of value that the company owns. As a result, any machinery that the company owns can easily be listed as collateral in the loan. At the same time, your stock and entire inventory can also be listed as collateral to increase the confidence of the lender further. However, to really access the highest levels of funding you’ll need to list some truly valuable assets. Property is usually one of the most valuable assets your business will hold. If you own any buildings these can be listed to boost your loan.

How can the money released from the assets be used to grow the business?

By accessing an attractive loan, you’ll suddenly have plenty of opportunities to grow your business. You could use the cash injection to make any acquisitions you’ve been planning. This can help you access new markets and complete time-sensitive deals punctually.

You can also use the loan to grow your company from the inside. This could be used to make additional hires, increase your stock capacity, or to open a new store in a new market.

Asset-based lending can also help you react to difficult market conditions or any unexpected bills. The cash injection can ensure that you survive a downturn in the economy, plus it can help you pay off creditors if money’s running low.

Asset-based lending can also be handy if you’re succession planning. It can help facilitate a management buy-out or buy-in and allow the new management team to quickly get to grips with the business.

When your business needs a loan, you’ll want to secure the best terms possible. Often, the smart way to do this is with an asset-based loan. By using this financing to grow the business, you’ll put your company in truly strong position.