There was a time when using the assets of a company to secure funding was seen as the last resort. Not anymore. Today, many businesses, especially small and growing businesses, are using asset-based lending (ABL) as their obvious choice to get funds in time. For the unversed, asset-based lending (ABL) is about using assets of a business to get a secured loan. This could refer to account receivables, inventory, real estate, or something like plant & machinery, equipment, and other balance sheet assets. In Canada, options like Accord Financial asset lending have helped small businesses in a big way, but is this the right option for your company? Here’s what you need to know.
Reviewing the benefits
For small businesses, getting a traditional loan from a bank may not be as easy as it seems on paper. The whole process and eventual wait time can be overwhelming, and it can be avoided by using asset-based loans. It is important to understand that ABL is not about losing assets, but making balance sheet assets more valuable and useful for the company in times of need. Also, asset-based lending typically has a lower interest rate, because the lender doesn’t have to take a higher risk. You can expect to get flexible terms and conditions, and as long as you have assets on the balance sheet, securing funds in time shouldn’t be a problem.
On the flip side
It is also necessary to understand the possible downside of asset-based lending. Firstly, you are using the assets of your business, and while that may sound simple, you are actually accumulating debt. If you don’t repay as per schedule, you will have more debt to handle. All of that can be managed by working with the lender. The good news is companies engaged in asset-based lending like to make things simple for small businesses, and they evaluate each case individually.
Taking the decision
With asset-based lending, you can expect funds within a day, but the processing time may vary. If you feel confused about finding a lender, select one that has worked with similar businesses in recent times and is more flexible with their terms and conditions. The interest rate is dependent on several factors, including your company’s financial performance. While some lenders may want a good credit history, this is not always necessary for asset-based lending. Check online for lenders to find more on how ABL can help your business.