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December 1, 2016

Why Asset Based Lending Is Popular With Small Businesses

Many small businesses find themselves needing more working capital for professional growth or daily operation. In these situations, asset based lending is a popular option for business owners to get the financing they need. It allows companies that may not have long credit histories to use their accounts receivable and inventory as collateral so that they can get funding for short-term business projects, growth and other company needs. As you consider financing possibilities for your business, keep in mind these reasons why asset based loans are continually sought after by small business owners.

Assest Based Lending is Flexible

Many small businesses appreciate the flexibility that asset based loans offer. Because this kind of financing is linked to invoices and other business assets, companies are not limited by how much financial aid they can receive. If your business does particularly well one quarter, your financing line typically grows as well, allowing you to receive more money for your business if needed. Additionally, lenders place few stipulations on how you may use the money you receive. Frequently, the only requirement is that it be used solely for business purposes.

It is Easy to Get

Small businesses, particularly young ones, sometimes have difficulties securing credit lines from lenders. However, asset based loans are generally easier to get than traditional loans. Lenders monitor loans regardless of the amount, and the cost on their end is often the same whether they are loaning small or large amounts of money. Because of this, many asset based lenders don’t mind requests for larger loans. The process can be fairly simple if your business consistently has good financial statements and if your customers pay their bills.

Assest Based Lending Builds Bridges

Another reason that asset based lending is popular with small businesses is that it can serve as a stepping stone to other types of financing. Young small businesses can begin establishing a line of credit, while more proven companies may build on their history with lenders and continue to show that they are a responsible risk. After setting up a credit history and working to ensure that that history is favorable, your small business typically may become eligible for more traditional kinds of financing.

Consider using asset based lending to increase your small business’ working capital and continue to grow your company. This type of loan sometimes comes with higher fees than you might find with a traditional loan. However, it remains popular because it offers that bit of extra help you need to sustain growth or get through a tight financial spot.