Asset Based Loans And Factoring Secure Financing Solutions
One of the primary solutions provided nowadays by lenders to various companies comes in the form of asset-based lending. If in the beginning, only a few lenders were likely to offer such a means of financing, now the situation has changed: asset-based lending has turned into one of the favorite fashions” of financing because it has passed the exam of versatility. Also, it has made obvious the value it has for the support of many businesses in the current competitive market. If your company passes through a short-term interval of cash necessity, you can find a reliable sustaining if you choose asset based loans or factoring as one of the means able to secure the necessary cash flow.
With asset-based loans, as the name indicates, you get to use your assets to obtain funding. In other words, you are offering a warranty some of your assets so that commercial finance corporations like an ABL Credit Facility or banks find you eligible for a loan. Does this mean that you lose ownership of your assets? No, you are not likely to lose asset ownership unless you fail to satisfy your payments to the lender. Businesses that go through a period of fast development, enterprises that have known past losses, highly leveraged businesses, and others alike can benefit from financing through asset based loans.
Of course, you do have to bring reliable proof for the lending institution to feel comfortable with the perspective of offering you an asset based lending opportunity. To complete such a goal, you need to demonstrate that your company benefits from the expertise of a professional management team, from sound business planning lines, from products / services that can survive in a competitive market, and from professional bookkeeping. You will maintain your asset ownership, but you do have to provide data for the accurate estimation of your business’s risk level, of the assets assigned to the loan, and, of course, of the amount you need to borrow. The assets most frequently assigned belong to the company looking for financing, and they come in the form of accounts receivables, of real estate owned by the company (be it buildings or land), of inventories or equipment and other accessories.
To what concerns factoring, it is a means of financing rather different from a loan because you get to trade your accounts receivables (invoices) at a discount and not simply provide them as collateral, as it happens in the case of asset-based loans. Moreover, it is an alternative to funding that does not require too long an interval of waiting, because you obtain the money in a maximum of 48 hours, instead of the common 30, 60 or even 90 days period of waiting for your money. Most frequently, businesses opt for this type of financing because it guarantees flexibility it depends only on the company what invoices it chooses to place as available for sale.
Also, you will meet no condition on how to use the money you obtain through factoring. Another aspect found attractive by borrower companies is that this method will consider the reliability (credit reliability) of their customers, and not theirs. Practically, we are dealing with an inexhaustible source of operating capital the more that your sales experience growth, the more your operating capital will undergo similar development. Rapidly developing businesses, as well as businesses new on the competitive market will find factoring as an agreeable solution and will not find it difficult to obtain such a means of business funding if they can provide proofs of their customer’s credit worthiness.
In the end, in the case where you are at the lead of a company that occasionally meets cash flow difficulties, taking advantage of asset based loans or factoring opportunities may provide you with the financing solution for which you have been looking and that you have not known how to secure it faster.