Asset Based Financing

Smart working capital secured by assets.

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Borrow As Needed

Our asset based financing acts as an on-demand extension of your cash flow.

Flexible & Renewable

We provide same-day renewals and early pay off discounts for reduced interest.

Pay Only if Used

Get the entire amount needed in one-shot or use as needed. Secured options available.

Why use asset based financing?

Let’s start with defining assets. Working capital is an asset and cash is the biggest asset companies use as working capital. However, not all assets are working capital. Whether or not an asset is considered working capital is defined by its ability to be used as a payment currency for your daily expenses. Property and equipment are assets but not necessarily working capital. Cash, inventory, prepaid expenses, debtors, and current liabilities are working capital assets.

Asset-based lenders prefer highly liquid collateral such as marketable securities rather than physical assets such as equipment and inventory. If the company seeking the loan doesn’t have enough cash flow or cash assets to cover a loan, the lender may offer to approve the loan with its physical assets as collateral. For example, a new medical practice might be able to obtain an asset loan only by using its equipment as collateral. Asset-based lenders primarily serve small to medium sized businesses that need to routinely cover short-term cash flow demands. This can help create an economy of scale within a larger business and lower costs over all.

Asset based financing: It is quick and easy!

Fast Results

It takes just 5 minutes to fill out your application and just a few hours to get offers!

Flexible Terms

We help you compare your options with ease and always work to get you the most favorable terms.

Expert Support

Our advisors will make sure that the product you have chosen will suit your business needs best.

How to qualify for asset based financing

Asset based funding can be cash or equipment, but it goes deeper than that. Cash is never just cash in the business world but rather a variety of working capital in different forms and from different sources.

Here’s what you’ll need to qualify:

  • 3+ months in business
  • $110K+ annual revenue
  • 550+ credit score

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How does asset based financing work?

Asset based financing is a way to use what your business already has as collateral to get more. Due to rapid growth or a sudden but expensive opportunity, companies seek asset based financing to get lower rates, higher amounts and longer terms by putting up their assets against a loan to minimize the loss to the lender should they default on payments.

It’s important to understand the uses, requirements and ideal cash flows for asset financing and asset loans. Business owners are putting up a part of their company as security for the funding to go smoothly, so you want to ensure you don’t lose that asset.

Business owners also need to know the difference between asset based financing and other types of financing. Sometimes the term is used interchangeably with inventory or equipment line of credit, which is a credit line based on inventory or equipment assets as collateral, or factoring, which is the purchase of future receivables not current assets. With asset based financing, assets are typically liquid cash but can be products as well.

What are assets?

Let’s start with defining assets. Working capital is an asset and cash is the biggest asset companies use as working capital. However, not all assets are working capital. Whether or not an asset is considered working capital is defined by its ability to be used as a payment currency for your daily expenses. Property and equipment are assets but not necessarily working capital. Cash, inventory, prepaid expenses, debtors, and current liabilities are working capital assets.

Liquid assets are preferred when looking for asset based financing because liquid assets keep your business from drowning. A liquid asset is something that can quickly be converted to cash, such as cash in a marketable security. More liquidity means a more agile and responsive business, which is essential to running a business. You want liquid assets, but you don’t want to have idle liquid capital that you’re not using. It’s a missed opportunity for growth and investment.

Why would you use asset based financing?

This type of funding is common for covering gaps in cash flow and payroll but can be used for a number of financial reasons such as refinancing existing debts, growth, mergers, acquisitions and buy-outs, investing in equipment or inventory and much more.

Asset based financing requests also stem from rapid growth and cash flow problems caused by growing. It would be easier for a new but expanding company to get approved for something secured to an asset or other collateral if they appear as a risk on paper due to a short time in business or erratic balance sheet.

Asset-based lenders prefer highly liquid collateral such as marketable securities rather than physical assets such as equipment and inventory. If the company seeking the loan doesn’t have enough cash flow or cash assets to cover a loan, the lender may offer to approve the loan with its physical assets as collateral. For example, a new medical practice might be able to obtain an asset loan only by using its equipment as collateral. Asset-based lenders primarily serve small to medium sized businesses that need to routinely cover short-term cash flow demands. This can help create an economy of scale within a larger business and lower costs over all.

Why use asset lending instead of other financing options?

There are many reasons a company would seek asset lending over a more traditional source such as a bank loan.

This financing option may be attractive to a company that has reached its credit limits with vendors and debt limits at the bank. However if the company is unable to finance raw materials to fill all orders, the business would be operating under capacity. The business can use asset funding towards their purchase order financing where the lender purchases the raw materials needed. Once the orders are filled, the vendor pays the lender, and the lender then deducts its cost and fees and remits the balance to the company. While useful for keeping operations running, this purchase order financing can incur high interest rates.

Time-sensitive opportunities are also common for this type of lending. A business that has an immediate opportunity or setback cannot wait for a bank loan to process paperwork and underwrite their loan. If they need money now, they can put up current assets to obtain
financing.

You might be wondering why you would use a cash asset to gain more cash. If lenders want something liquid, why not use it yourself? Well, if you’re using a marketable security, that investment is making you money. You’d like to keep the money in that account but can leverage it to obtain more cash to run and grow your business. Or, you might have invoices coming in that are tied up and need to cover that gap with outside funding.

What are some examples of assets?
You know that asset based funding can be cash or equipment, but it goes deeper than that. Cash is never just cash in the business world but rather a variety of working capital in different forms and from different sources. Examples of assets are:

  • Accounts receivable
  • Inventory
  • Machinery and equipment
  • Real estate or property
  • Marketable securities
  • Investments, checking or savings accounts
  • Purchase orders and invoices
  • Other source of income that can go directly to the lender

How is an asset based loan different from factoring?

Asset based loans are often confused with factoring because of the use of invoice and future receivables. The products are in fact different but provide similar benefits. With a factoring transaction, there is no loan or borrowing of money. The company in need of cash sells its future receivables to improve its immediate cash flow. This is similar to an invoice-backed line of credit where financing is provided based on the expectation of incoming revenue.

Both asset loans and factoring allow funders to work with smaller companies that may have poor credit or small cash flow. Factoring also does not commonly use collateral which can help aid businesses with few assets, cash or equipment.

How is asset lending different from a line of credit?

Equipment lines of credit and inventory lines of credit are often used interchangeably used with asset lending because they are a form of asset lending, an asset is used as collateral, however not all asset lending is a specific type of line of credit. A set payment loan can also be secured by company assets.

What if I don’t have cash assets?

Yes, lenders prefer highly liquid collateral such as market securities and invoices that can be quickly converted to cash if the borrower defaults on the payments. Loans using physical assets are considered riskier because the item used as collateral may take longer to obtain and sell, therefore the total loan or funding amount will be considerably less than the book value of the assets.

With cash assets, borrowers can expect around 70-85% of what they have to be used as the funding amount. With less liquid assets such as real estate or equipment, the company may only be offered 50% of its required financing. If you don’t have any cash assets, now may be the time to do so. A market security is a popular investment option for businesses because it takes idle liquid cash and earns returns on it. Instead of holding on to cash in a savings account which offers little to no interest, you can invest a portion of the cash in short-term liquid securities. If you find your company is unable to secure asset funding, another program may be a better option for cash flow help.

Other options for small business funding are:

Small business loan
Loans can come from many providers such as a bank, a credit union or the Small Business Administration. Loans have government restrictions and strict funding guidelines so they can be hard to qualify for, but the interest rates are lower than most other options and some cash flows prefer longer terms up to 10 years. Loans also have a set amount of money given and set payback amounts regardless of how your business is performing.

Line of credit
Think of a line of credit like a credit card, but on a much larger scale. A business line of credit can provide revolving credit for your business to use. A funder gives you a max credit limit to spend and you only spend what you need, meaning you only pay interest on what you use, nothing more. This is great for businesses who have fluctuating cash flow needs for an extended period of time and want more term flexibility than what a loan can offer.

Factoring
Within the merchant cash advance sector of finance there are different types of funding such as debt consolidation, credit card splits or standard funding for the purchase of future receivables.

Alternative funding has higher rates and shorter terms, but has more relaxed qualifications allowing for business owners rejected by banks to gain access to working capital. Most companies who don’t have enough assets for asset funding best qualify for either a collateralized line of credit or factoring.

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