Using Asset-Based Lending To Your Advantage

When it comes to running your business, you always need to stay mindful of your finances. If you’re spending more than you can afford or are hit with surprise expenses without warning, it can be difficult to guarantee you’ll have access to working capital when it is needed. Thankfully, an array of alternative financing options exist to help small business owners stay afloat during tight times. Asset-based lending, for example, offers a number of unique advantages to business owners in need of a cash flow boost. Look over these tips to learn how to use ABL to your advantage.

What Is ABL?

Lending based on your assets, also known as ABL, is a straightforward concept to wrap your head around. Like many loans, you will need to put forth collateral with this option to secure the financing. The amount you are allowed to borrow will be based around the estimated value of the collateral that you put forth. Usually, the lender will provide somewhere between 70 and 80% of the total value of the asset. Depending on the collateral you use, you can take out a substantial amount and cover any expenses you might currently be facing.

Lines of Credit

For small business owners, asset-based lending with a line of credit is a great way to maintain your finances. You can put forth an asset and receive access to a credit line instead of the traditional lump-sum payment. This is a useful option because it means that you only pay back what you use. If you don’t touch the full amount of your credit line, it simply remains where it is until you require it. This is a helpful way of having a safety net in place for when your finances are tight or maintain better control of your budget.

Capital When You Need It

Access to capital is critical for a small business because cash flow dictates when a company can and cannot do. If you want to grow your business, you can’t start the process until you have extra cash for the expenses involved. By using ABL or a similar method of alternative financing, you will have the working capital you need to expand, cover surprise expenses, or take care of standard operational costs. There’s a lot to be said for having the money available in the event that it is needed instead of waiting years to save the funds.

There are several reasons to consider asset-based lending to stimulate the cash flow of your small business. Look into the details of this service, find an appropriate lender, and get the application process started.