Asset-based lending can be an excellent way of bringing in a cash injection with favourable loan terms. This is because lenders will be able to take control of your assets as collateral if you can’t repay the loan. You can use all sorts of different assets from machinery to property and buildings. Read on to find out about the benefits of asset-based lending.
How does it work?
Asset-based lending is the process of releasing equity by using company assets as collateral. Lenders will be confident that they can see a return on their money having investigated your assets. This confidence can allow you to access higher levels of funding to help you grow your business in different ways.
Acquisitions
The main benefits of asset-based lending are that it can help you quickly and securely grow your business. One area where this can help is in acquisitions. If you’ve been planning to acquire another company, you can complete this time-sensitive deal by using a cash injection from an acquisition. This deal can help you grow by accessing new markets.
Internal growth
Asset-based lending can help your business grow internally too. By using the cash boost of this deal, you can make additional hires, increase your stock capacity, or open a new store in a new market. Any of these options can boost your business in the long term as it expands.
Dealing with unexpected bills
Sometimes an unexpected bill can put your business under pressure. Similarly, if there’s an economic downturn, then your cash flow can be severely reduced. In this situation, you’ll need a cash influx to keep your business going. One of the most secure ways to do this is via asset-based lending. This can give you the money you need to navigate a difficult financial period by utilising your company’s assets.
Succession planning
Asset-based lending can also make succession planning easier. The cash you bring in can help facilitate a management buy-out or buy-in and allow the new management team to quickly get to grips with the business, knowing that they have the short term financing to keep the business running optimally.
Asset-based lending can be an excellent way of releasing equity for your business. Whether you’re ambitiously planning an acquisition or simply trying to navigate a difficult financial period, this type of cash injection can be extremely useful for your business.