As so many businesses are discovering, obtaining financing through traditional means can be difficult. Many lenders have added tight restrictions and high standards to their lending process. Since the standards have been raised pertaining to credit scores and history, it can seem impossible for a business to get a loan. Businesses seeking alternative financing often find an answer in asset-based financing.
Asset-based financing, also called secured financing, is any sort of borrowing that uses a company’s assets as security for the loan. The advantage this form of alternative financing offers is that a wide range of businesses can take advantage of it. Unlike traditional lines of credit, secured financing is based on assets, not creditworthiness. The lender is more interested in the value of the assets owned by a business seeking financing than they are the company’s credit history.
In asset-based loans, your business’ belongings are the security for the money lent to you. If you are unable to repay the loan in the way and timeframe specified, the assets are seized. Types of assets commonly used as collateral in a secured financing transaction are machinery, real estate, equipment, and inventory. Factoring is another type of asset-based financing.
Who is this kind of financing for? A short answer is any business struggling to obtain financing through traditional methods. More specifically, asset-based financing works particularly well for companies who either have poor credit history, or are too new to have any established credit. Fast-growing companies also benefit from this form of financing.
Secured financing is typically a short-term solution a business can use to increase their working capital while they work to reestablish good credit, or have more time to be in business. Obtaining financing based on your assets is a way to increase your cash flow so you can have more time to stabilize your company’s overall finances.
If you are short on cash, you aren’t out of options. Contact ACCG today to see how you might be able to utilize the assets you already have to obtain the loan you need to continue growing your business.