Asset Based Credit: Structuring Financing from the Inside Out
Are you looking for a financing method that is just right for your business? If so, you may want to consider asset based credit. This is a type of financing that’s secured by your company assets, and it is designed to work as a revolving line of credit. So, why might you consider this type of financing? Below are several advantages to think about.
One benefit of asset based credit is improved liquidity. This is perhaps the most important advantage your company will get to experience. If it is used properly, this method can provide predictable cash flow and financial stability. This is highly beneficial for companies that are quickly growing or have seasonal revenues.
Another advantage of asset based credit is flexibility. There are typically very few restrictions and rules when it comes to using the funds, as long as it is being used for the business. Additionally, the financing line can increase with your sales because it is tied to your accounts receivable and any other collateral. Because of this, you will not have to wait through the entire underwriting process again.
Asset based lending is also easier to obtain than lines of credit and regular loans. It is much more likely that you will get approved for this type of financing program as opposed to other options. Typically, minimum requirements include a short history of reasonable financial controls and profitability. Additionally, you must have assets that are able to be leveraged. What do these assets include? The easiest one is accounts receivable. Invoices from creditworthy clients can be turned into cash easily, making them excellent collateral. Inventory, real estate and equipment can be used as collateral as well.
This type of lending can additionally be used as a stepping stone on your way to qualifying for other types of financing in the future. It is generally used by companies that are in the intermediate growth phase. If you have previously used factoring financing lines but you aren’t quite ready for a traditional line of credit, asset based credit is a good option for you. It can allow you to establish and improve your track record and allow you to eventually move on to a more cost effective solution.
Lastly, this type of credit can be obtained fast. If you meet the requirements, you can typically get your funds rather quickly. The application and underwriting period is faster than with a conventional business loan. So, if you are looking to grow your business, consider these benefits and obtain the financing you need.