It’s always exciting to see your business start to boom. What is not exciting, though, are the rising operating expenses that accompany a growing business. To cover your business during this period of growth, sometimes you need more working capital than you currently have coming in. If your business is relatively new, though, and doesn’t have an established line of credit, or if your business’ credit history is poor, getting a loan from a bank may not be the best option for your company. Instead, you may want to look into asset based lending.
This kind of lending allows you to use your company’s assets as collateral for a loan. This can include equipment, machinery, inventory and invoices. Usually, these loans have lower interest rates than the typical loan and borrowers are generally required to pay interest only on the amount received.
There are many benefits that come with choosing asset based lending over a financial institution. One of these is the credit limit. Instead of being set on your account, it shifts based on your company’s current invoice balances. Because of this, your lender tends to be more involved than a bank might; however, this allows you to borrow more money for your company than you would otherwise be able to.
Additionally, a loan based on your assets allows your company more financial freedom. Traditional lenders usually put conditions on a loan which sometimes hamper your business activities. These are largely removed with asset based loans. Lenders may attach some requirements to a loan but many of the original limitations about prepayments and investments no longer apply. Your company is free to handle your money in the way that will best suit your business needs.
Asset based loans also have the ability to be tailored to your business, so you don’t have to work with something that’s only structured to work one way. You usually receive money faster as well. Companies often have weekly, if not daily, access to their credit line so that you can seize a great business opportunity or order more of a product you didn’t expect to be so popular.
Banks aren’t the only way to get financing. Sometimes private lenders offer your company more when it comes to interest rates and financial freedom. Consider asset based lending to take care of your business while it expands. This option may help your business retain some financial freedom, and also get you the money you need when traditional lenders are not possible.
