asset-based lending

4 Ways You Can Use an Asset-Based Loan | Asset Based Lending

Ezra Cabrera | March 5, 2019


    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 funds for additional working capital from these types of lenders, a business owner will often go through a strenuous application process without the guarantee of approval. If you need to financing for your company but you don’t meet the requirements of a traditional lender, you may want to look at 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 expense, here are four ways you can maximize the use of your funds:

    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 undertake 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 require capital. You need funds for advertising and marketing campaigns, as well as hiring more employees while paying the ones you already have in a timely manner. If your business is in need of sustainable growth, asset-based loans can help cover the costs of expanding your business.

    3. Restructure Your Business Model

    The business world is constantly changing, and it’s important for a small business to keep up and remain competitive. In order to do that, business owners may need to restructure their business models, 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, purchase new inventory, offer more services, and take on new projects.

    4. Acquire Additional Working Capital

    If your business is facing cash flow crunches, best to address these issues as soon as you identify them. Cash flow issues can negatively impact your business in the most serious of ways, and in a worst-case scenario, put you out of business. When in need of additional working capital to restructure your business, purchase equipment, pay for daily expenses, acquire inventory, or pay for unexpected business-related expenses, an asset-based loan may be the ideal solution for you. You can easily repay back your asset-based loan as your business earns a profit, and you can also elect to keep your credit line open for future use.

    5. Marketing and Advertising

    Customers are the lifeblood of your business because, without them, you wouldn’t have anything to run. Even though you already have a loyal customer base, a growing business needs to have a steady influx of customers. Marketing and advertising play a huge role in bringing in customers to your business.

    If you want to expand your business, you need to launch a marketing campaign specifically made for your company. You can create marketing strategies yourself, but to free you of time and effort, and give you more measurable results, you can hire a reputable digital marketing agency. If working capital is an issue, you can apply for asset-based loans.

    6. Purchase Supplies and Inventory

    There are certain supplies your business needs to operate. Whether you own a restaurant or a retail business, having enough supplies and inventory is important. When you don’t have the supplies you need, you won’t be able to perform the services or provide the products your customers expect of you.

    If you’re running low on supplies or you need to purchase inventory to prepare for peak season, asset-based loans give you the working capital you need to cover the costs of these purchases.

    7. Purchase Equipment

    Outdated or broken equipment can negatively impact efficiency and productivity. In other cases, businesses may need to purchase equipment to keep up with customer demand. However, equipment comes at a hefty price.

    If you need to purchase equipment and machinery, applying for asset-based loans can help you pay for these expenses so you can continue serving your customers.

    Applying for Asset-Based Financing

    Asset-based loans are a great financing solution for companies that have sufficient assets to use as collateral. The most common types of collateral lenders ask for are accounts receivables, inventory, machinery and equipment, real estate, and other tangible assets that are deemed valuable. Keep in mind that the requirements for asset-based lending vary from lender to lender, so be sure to clarify everything with the lender you’re working with.

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    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.