How Does Asset-Based Lending Work for Small Businesses?

Asset-based lending for small businesses usually involves putting up collateral such as equipment, inventory, buildings, or accounts receivable, in exchange for immediate cash. The amount that you can receive for such assets will depend on the kind of asset involved, although it is generally in the neighborhood of 70% or 80% of the actual value of the asset.

Securing an asset-based loan

It is sometimes difficult for a new company to arrange for an asset-based loan, because lenders prefer to see some company history before taking a chance on a new client. It will generally be necessary to make inquiries and do some research in order to find a lender willing to work with a startup or fairly new enterprise. However, lenders do look favorably on small businesses which have good paying customers, keep their financial records in good condition, have accurate reporting systems, and which have on-hand inventory that is commonly exchanged.

Advantages of small business asset-based loans

There are several situations which small business routinely face where an asset-based loan makes good sense. Many businesses which are at least somewhat seasonal in nature may find it beneficial to secure an asset-based loan to get past the periods where cash flow dries up until the next busy time of year. If an opportunity for growth pops up, this may be the right solution for obtaining needed capital to take advantage of the opportunity. In cases where the asset being used as collateral are your accounts receivable, there would be a strong chance for approval as long as your customers pay their invoices fairly promptly. This means that approval does not depend so much on your company credit history, or your personal credit history.

Asset-based lending with Himsl Consulting

If asset-based lending is an option that you’ve been considering, we may be able to help your small business with favorable opportunities. Contact us at Himsl Consulting, so our financial specialists can discuss possibilities which may work for you, and be beneficial for your small business.