The Advantages of Using Asset-Based Lending to Increase Cash Flow
One problem facing small business owners is the frequent cash flow crunch. Unlike large, well-established companies, smaller businesses who don’t have high credit ratings often face hurdles when trying to get approved for a traditional bank loan. However, even a small company has business assets that can be used as collateral for a loan to help out when the next cash crunch hits.
What is Asset-Based Lending?
Most businesses have fixed assets that may include manufacturing equipment, computers, or vehicles. Asset-based lending enables a business owner to put up these assets as collateral to secure financing. It’s also possible to use flexible assets such as accounts receivable or inventory as collateral. Asset-based loans are suitable to cover short-term lack of cash, cope with an unexpected expense, pay off a higher-interest debt, or for business expansion.
Asset-Based Lending Means Your House is Safe
The most important difference between asset-based lending and a traditional bank loan is that it’s not necessary to pledge any personal collateral. A business owner trying to enter into a lending arrangement with a bank may have to use cash from his personal account or guarantee the loan with personal assets such as his place of residence. Asset-based lending only requires you to make use of your business assets.
Other Advantages of Asset-Based Lending
Asset-based lending comes with several additional advantages for entrepreneurs.
- A high credit rating is not required.
- The assets that serve as your collateral are still available to you for use.
- Asset-based loans tend to be processed and approved quickly.
Asset-based lending is an extremely useful financing arrangement for a small business. At JNI Commercial Lending, we can help your small to mid-sized business cope with those inevitable cash crunches. JNI’s clients are companies of all sizes, and we provide a wide range of financing options including asset-based lending. So set up a consultation with us today to find out how we can help your business succeed and grow.