Finance · 29 December 2015

An introduction to the benefits of asset-based lending

Your business can use invoices to access capital
Your business can use invoices to access capital

When young businesses are looking for that all-important growth capital, it pays to know the options – enter asset-based lending.

As a funding method which has its origins thousands of years ago, asset-based lending has enjoyed a renaissance since the end of the recession and is now being used by an increasing number of micro, small and growing companies.

Our sister title, Real Business, has produced a comprehensive guide on asset-based lending in partnership with ABN AMRO Commercial Finance. It looks at what the different options are, speaks with four companies that have used it for different reasons, and looks to inform business leaders on why it might be the right fit.

Serving a a little teaser to the full guide, we’ve had a look at five different situations and explained how the finance option can be effective.

Asset-based lending providers have a diverse range of businesses contained within portfolios, so reach out to ask where this kind of finance might suit you.

Startup business:

If you are in the infancy of building your business, asset-based lending can be a great way of providing capital for those crucial early purchase such as premises, equipment, R&D and even staff. While this kind of company might not have any physical assets to leverage, intellectual property and early orders can be utilised.

Growing business:

Finance is one of the key factors that is cited as holding back a firm’s potential growth, but asset-based lending can be effective as a temporary or long-term solution. From financing mergers and acquisitions, acquiring a new office space or covering the early costs of expansing overseas, a variety of channels are available.

Business refinancing:

A long-term banking partner or equity backer may not be providing the kind of flexibility required by a senior management team. Asset-based lending here can help to buy out a large shareholder or consolidate existing facilities.

Turnaround:

A struggling business might feel like the tides are flowing against it, but asset-based lending can often leverage assets either sitting dormant or previously never thought of as having worth. While a bank might be saying no to extending an overdraft or granting a new line of working capital, asset-based lending has the flexibility to do just this.

Succession: Making sure the business passes on to the next generation or leader is becoming increasingly hard in today’s economic climate. While a successor might not have all the capital lined up to allow you to go sailing off into the sunset for retirement, asset-based lending can be used to finance such a deal and then provide capital for new projects.

KEEP READING: Have a look through the full digital guide by clicking here

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ABOUT THE EXPERT

Hunter Ruthven is the editor of Business Advice. He is also the editor of Real Business, the UK's most-read website for entrepreneurs and business leaders at the helm of growing SMEs. Alongside this, he is part of the team that hosts the Growing Business Awards, First Women Awards and Future 50 initiative. Prior to his role at Real Business, he was editor at competitor website Growth Business and head reporter at M&A Deals. Throughout his career he has interviewed leading entrepreneurs including Alex Chesterman, Lopo Champalimaud, Sarah Wood, James Averdeick and Alex Saint.

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