An asset-based loan is a type of lending provided by the finance institutions to the enterprises, small or big against their collaterals like inventory, accounts receivable, etc. In other words, the lending companies will provide finance to the small businesses that lack sufficient cash flow for various operations. However, they have the assets, which they can offer as collateral against the loan amounts. For the lending companies, the asset is of more relevance than the cash flow status or the balance sheet figures. This type of finance is beneficial for small businesses to get timely finance for the growth of their businesses.
It is undeniable that asset based lending is more flexible in comparison to most of the other financing options. Therefore, the next time you need working capital for your business, you should think about this option with an open mind. In fact, if you do not have any fixed assets for collateral, you can easily make some easy and fast money with the help of this option. Likewise, if the inventory levels are already high, you can always treat your inventory as collateral. Last but not least, this option is likely to come in handy if your growth has been putting a strain on your resources.
Nevertheless, you have two different options as far as asset based lending is concerned. Firstly, you can use your invoices as collateral and get them factored to get some advance. It is worth mentioning that you may be able to get even 85% of the amount as an advance payment if you succeed in finding one of the best factoring companies. Secondly, your inventory can serve the purpose and help you in securing an asset based loan. However, the second option may not always work to your advantage especially if you have obsolete inventory or the work is still in progress.
Of course, there are several funding solutions which you can choose in order to alleviate your funding issues, just visit us. For example, you can think along the lines of applying for a loan or borrowing money from a lender. However, if you have stepped into the industry quite recently, your application may not get approved. In fact, your credit score may also play an important role in determining the fate of your application. In such a situation, you can either continue to wait for approval or play safe by getting your invoices factored before it is too late.
Invoice factoring is one of the highly popular funding solutions which can help you in increasing your cash flow sans the trouble. Firstly, you may not have to worry about your credit history at all especially if the factoring company has no interest in knowing your score. Secondly, if you apply for a loan, you can expect to get the payment before a couple of weeks. On the contrary, factoring may help you in achieving the desired results with one or two days. Last but not least, a bank is unlikely to grant a loan to a startup. However, even if you have just begun, you can always rely on factoring.