Alternative ways to raise funds using asset-based lending
While the news that the UK’s economy has narrowly swerved entering a triple-dip recession with a growth rate of 0.3% in the first quarter may provide a glimmer of hope for UK businesses, many firms are still struggling to make headway against a relatively subdued economic backdrop.
Businesses that have had their expansion or development plans put on hold due to financial constraints will increasingly be looking at a number of lending avenues to secure the capital they need to drive their businesses forward.
One such option that is becoming increasingly popular for businesses is asset-based lending – with figures from the Asset Based Finance Association (ABFA) revealing that its members have provided finance to roughly 42,000 businesses while asset-based lending has increased by 4% between 2011 and 2012.
Asset-based lending allows businesses to borrow money from lenders against the property or other assets connected to their business.
Here are just some of the advantages of asset-based lending:
Unlike other forms of lending to businesses, asset-based lending may have a faster approval process as banks and other lenders have security over your assets, presenting them with minimal risk.
Generous loan amount
Invoice Factoring is a common method of asset-based lending and allows you to lend against your outstanding invoices, which can be up to 95% of this amount. This gives the businesses the instant cash injection they need to continue with their operations.
Lending against a wide range of assets
While asset-based lending can often be leveraged against a company’s land or property it can also be lent against items such as stock, machinery and business equipment. Businesses can also secure lending against other liquid assets, even intangible ones such as intellectual property or accounts receivable.
However, it is important to note that the worth of any business asset is measured against the value it would hold if a business were to become insolvent.
If your business is struggling in the current climate, you may want to seek professional advice on a corporate administration.