Looking for Ways to Finance Your Company: Try Asset Based Lending

Looking for Ways to Finance Your Company: Try Asset Based Lending
Looking for Ways to Finance Your Company: Try Asset Based Lending
December 27, 2016

Financing your business can be very difficult because there are very few lending houses willing to offer financial assistance when compared to the large volume of existing and budding businesses that are seeking for funds. Asset-based lending (ABL) has been shown to be efficient in offering the desired financial assistance. Every business entrepreneur should try this opportunity once to make a solid start-up.

A lot of cash is required for purchase of asset

Every viable firm is focused on growing their revenue. Any firm that fails to raise funds internally will not last very long before they go out of business. Much of the cash that a firm has will normally go into acquiring new assets or adding strength to the equity base of the firm. Asset based lending can come in to cushion the cash deficit in acquiring the asset.

Read also: Merits and Demerits of Purchase Money and Non-purchase Money Loans in Short Sales

The success of one company over another will depend on the wealth of information they have

In the field today, there are many firms delivering a similar product or offering similar services. What stands one company out from their competitors is the variety of lending options they have or their willingness to try out new sources of financing. This is because different situations may require a firm to use different financing alternative.

Asset-based lending is not new in Canada

Inasmuch as asset-based lending can be regarded as a relatively new lending alternative in Canada, they have been around for many years. This type of funding has been utilized by various corporations and not just the smaller firms in the small and medium enterprise marketplace – and their success has been widely documented.

Read also: A Cash Business Loan might Just be Perfect for a Working Capital

Canadian banks get most of the business finance demands

It is not surprising that the Canadian banks get the lion share of loan application. The reason behind this, like mentioned earlier, is because the majority of people are not aware of the alternative funding sources; hence they make the banks their first point of call when they are faced with a financial crisis. The bitter reality is that not many firms can meet the credit requirement that can guarantee them a bank loan.

The massive influx of firms seeking bank loans makes it difficult to get one

The law of demand and supply operates strongly in the bank. The high amount of firms seeking for bank loans has made it imperative for banks to constantly increase their terms of giving out loans as a way of naturally eliminating some of the applicants while retaining those that have the capacity to pay back without undue risk.

Read also: What You Never Knew about the Small Business Administration Loans

Asset-based loan funding is more flexible than commercial bank funding

The majority of loan applicants who have been denied loans by commercial banks are likely to be accepted with open arms when they approach an asset based loan funding house because their terms of a loan are usually more flexible than that of the commercial banks. Also, they are less likely to base their judgment on credit score – which in most cases disqualify a lot of firms.

Asset based lending frequently combine inventories and equipment into one lending

Business owners are often surprised by this possibility of combining account receivables (A/R), equipment and inventories into one borrowing facility – and this fluctuates with your sale. Your borrowing power will increase automatically as your sales increase.

Combining loans into one eliminates the need for multiple loans

When a business needs multiple loans to meet their demand, it will, in the long run, mean that they will have to make provision to settle interests accruing from the various loan sources. Leveraging on asset based lending can eliminate these discrepancies.

Read also: Commercial Mortgage Bridge Loan can be Your Life Saver in Various Situations

Article highlights

  • The number of businesses seeking financial assistance is always greater than the number of lending houses.
  • What separate two businesses depends on the lending options they have.
  • The bank is the first point of call to most borrowers.
  • Firms need to generate funds internally to grow.
  • Acquiring new asset takes the funds available to most firms.
  • Asset based loan is not new in Canada.
  • Asset based loan I available for different strata of businesses.
  • Banks hold credit scores in high esteem when lending to firms.
  • The terms of bank loan are on the rise because of the influx of borrowers.
  • Asset based loan combine various loans into one.

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