As the name suggests, asset-based finance involves borrowing against your assets – your plant, equipment and (if you own them) your premises. With invoice finance (factoring or discounting), you can also borrow against the value of your outstanding invoices.
The range of companies offering this type of loan is huge. For smaller businesses, the challenge is finding lenders willing to offer credit to young companies. This can be difficult, as many asset-based lenders focus on larger loans since this type of finance involves significant fixed costs. That said, an asset-based loan could be much easier to secure than a bank loan, particularly if your company has a poor or undeveloped credit history – with this type of finance, it’s your collateral that matters most.
The good points about asset-based loans
Asset-based lending can be a vital source of capital for companies that are growing fast and have highly geared finances. In addition to powering growth, it can be an excellent way to get over an unexpected cash flow problem – especially as alternative lenders will tend to look more favourably on applications than traditional banks. In particular, these loans work well for manufacturers, distributors and service companies, though any business with assets can benefit. However, the best aspect of asset-based lending is that you can realise the value of your assets whilst continuing to enjoy their use.
The downsides of asset-based finance
So what are the potential obstacles? First, the amount you can borrow will depend solely on the amount of your assets (or for invoice factoring and discounting, the amount of your outstanding invoices). Further, with invoice-based financing lenders may be cautious about lending against customers who pay slowly or have a poor credit history. In addition, asset-based finance tends to cost more than traditional bank loans, due to the extra work involved, though it can still be competitive compared to an unsecured overdraft.
What are the alternatives?
If asset-based finance is not right for your business, then there are other options. A traditional bank loan or overdraft is a possibility, though these can be difficult to secure. Equally, an emergency cash loan is a good way to deal with cash flow problems – in many cases, lenders can have the money to you inside 24 hours – though this clearly isn’t a suitable option to fund business growth.
How Cashsolv can help with asset-based finance
Cashsolv are specialists in asset-based finance. We use a panel of lenders, so we can match you with most appropriate partner for your needs and negotiate the most competitive interest rates. If invoice factoring or discounting is more suitable for your requirements, we can again match you with the best lender and secure you the best possible terms. Finally, we fund emergency business loans ourselves, meaning we can deliver anything from £20,000 to £250,000 inside a day if you hit cash flow problems.
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