Asset-based financing is a great way to fund your business without having to take on additional debt. It involves using your existing assets, such as inventory or accounts receivable, as collateral for loans from banks and other lenders. This type of financing can help you meet short-term liquidity needs and provide the capital required to grow your business. There are several different types of asset-based financing available, each with its own unique set of benefits and risks.
Secured loans are a type of asset-based financing that involve putting up your business’s assets, such as inventory or equipment, as collateral for the loan. This reduces the risk to the lender since they can repossess and sell the asset if you default on the loan. The biggest advantage of secured loans is that they typically offer lower interest rates than other forms of financing. However, this type of financing also carries some risks; if you default on the loan, you could lose your asset.
Invoice financing is another form of asset-based financing in which a lender provides funds based on money owed to your business by customers or clients. The lender will advance you a percentage of the total amount owed and hold the remainder until it is paid in full. This type of financing is great for businesses with steady sales but cash flow problems, as you can access the money right away without having to wait for customers to pay their invoices.
Factoring is similar to invoice financing in that it provides funds based on money owed by customers or clients. However, with factoring, the lender typically takes possession of your accounts receivable and collects payments from your customers directly. This reduces the risk to you since you won’t have to worry about collecting payments yourself. However, it also means that there may be less flexibility when negotiating terms with your lender.
These are just some of the asset-based financing options available to you. Each has its own set of benefits and risks, so it’s important to carefully consider which option is best for your unique situation. Before taking out any type of loan, make sure you understand the terms and conditions associated with it so that you can be sure it will meet your business’s needs.
Asset-based financing can provide a great source of capital for businesses looking to grow or cover short-term liquidity needs. By understanding the different types available and considering their advantages and disadvantages, you can choose the one that best fits your business’s needs and goals. With careful planning, asset-based financing can help take your business to the next level. Contact Artis Commercial Capital today to explore our asset-based solutions, and learn how they can help your business.