Asset-based lines of credit provide a great opportunity for businesses to access working capital while managing their cash flow. This type of financing can be especially beneficial for small and growing businesses that need additional funds to expand operations or purchase equipment. Asset-based lines of credit are also attractive because they offer more flexibility than traditional loans, allowing borrowers to draw from the line as needed and pay back only what is borrowed.

How Asset-Based Lines of Credit Work

When businesses take out asset-based lines of credit, they are essentially borrowing against their assets. This includes inventory and accounts receivable, as well as equipment or real estate. The line of credit is secured by these assets, which gives lenders more comfort because they know that if the borrower defaults on the loan, the lender can seize the collateral in order to recoup its losses. This type of financing is attractive to lenders because it’s a low-risk loan, and they typically offer competitive interest rates due to the security offered by the collateral.

More Financing than Traditional Loans

Asset-based lines of credit also allow businesses to access much larger sums than traditional loans. The line of credit amount is usually based on the value of the assets being used as collateral, so businesses can borrow up to 80-90% of the value of those assets. This provides businesses with more working capital and helps them cover costs associated with growth, such as purchasing inventory or investing in new equipment.

Better Cash Flow Management

´╗┐Finally, asset-based lines of credit provide companies with flexibility when it comes to managing their cash flow. Since the line of credit is not a fixed amount like a traditional loan, businesses can draw from the line as needed and pay back only what is borrowed. This allows them to access additional working capital quickly when it’s needed, without having to make large lump-sum payments.

Asset-based lines of credit are an attractive option for many small and growing businesses looking for extra funds to capitalize on growth opportunities. They offer more competitive interest rates than traditional loans, as well as the flexibility to access larger sums of working capital. Plus, businesses can use their assets as collateral and benefit from the ability to draw from the line and pay back only what is borrowed. If your business is looking for a way to finance growth without sacrificing financial stability, contact Artis Commercial Capital and learn about our asset-based financing solutions.