If you’re a new business owner, you may be familiar with the difficulties of securing a loan from banks and other traditional lenders. When seeking loans for additional working capital from these types of lenders, business owners often go through a strenuous application process without the guarantee of approval. If you need to finance your company but you don’t meet the requirement set by a traditional lender, you might want to consider asset-based lending.
How to Make Use of Asset-Based Lending
Asset-based financing is a loan backed by the value of your business assets, such as commercial real estate, inventory, equipment, or accounts receivable. While you can put the funds from an asset-based loan towards any business-related expenses, here are four ways we suggest using them:
1. Seasonal Financing
If your business relies heavily on seasonal sales, a financial cushion is important to keep your business afloat in the off-season(s). An asset-based loan can help you pay for everyday expenses, cover payroll, pay vendors and make off-season repairs and renovations while you wait for profit and revenue.
2. Opportunities for Growth and Expansion
Taking advantage of growth and expansion opportunities is one of the best ways to stay ahead of your competitors. That said, growth opportunities don’t come cheap. You need money for advertising and marketing campaigns, and hiring more employees while paying the ones you already have on time. If your business is in need of sustainable growth, asset-based loans can help cover the costs of taking your business to the next level.
3. Restructure Your Business Model
The business world is constantly changing, and it’s important for small businesses to keep up and remain competitive. In order to stay in the game, business owners may need to restructure their business model, which can be expensive. An asset-based loan can help you cover the costs of restructuring. You can use the funds to hire more employees, buy new inventory, offer more services and take on new projects.
4. Acquire Additional Working Capital
If your business is facing cash flow problems, make sure to address these issues early on. Problems with cash flow can negatively impact your business (even put you out of business). When in need of additional working capital to restructure your business, buy equipment, pay for daily expenses, purchase inventory, or pay for any business-related expenses, an asset-based loan can help. You can pay back your asset-based loan as your business earns money, and you can choose to keep your credit line open for future use.
To learn more about asset-based lending, SMB Compass can help. We have funded over 1,000 businesses in the United States and we can help yours too! Give us a call at (888) 853-8922 or email us at email@example.com to talk to a lending expert today.