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Busting the top 10 myths about asset based lending

06-10-2021|By Ultimate Finance

With over half of SME owners rating their mood about their business as “good” in the second quarter of the year, growth aspirations have now returned to pre-pandemic level. Despite 86% agreeing that their current plans are based on what they can afford, there has been a noticed increase in business owners looking to access funding to unlock further growth.* We’re now turning the spotlight on some of the most common funding myths that might be holding other business owners back from meeting their ambitions with asset-based funding.

*SME Finance Monitor Q2 20201, independent report by BVA BDRC, August 2021


MYTH 1: Only struggling businesses need to use business funding.

It’s actually the opposite. Keeping moving towards set goals, whatever they may be, is the lifeblood of business success, and that requires constant cashflow.. And what helps prevent disruption to cashflow? Funding.

Savvy businesses know that the cost of business funding can pale into insignificance when you look at the potential return it can deliver. We find the businesses who come to us are far from businesses who are struggling, but businesses who are looking  for a funding partner who can help support their ambitions.


MYTH 2: It’s harder to get funding in today’s economic climate

Not at all. What finance providers are finding is that businesses aren’t necessarily aware of their options. That’s why we believe non-traditional lenders and introducers have a pivotal role to play in helping businesses prosper. By partnering with brokers, accountants, lawyers and financial advisors across the UK, we’ve already lent over £10bn in funding since 2001, and we’ve no intention of stopping anytime soon.


MYTH 3: Only badly managed businesses have cashflow issues

Managing cashflow can be a challenge. It’s never an easy balancing act because you have to invest in the product or service you’re offering before your customers pay for it. And, if you’re like any business we know, you’ll find that your own customers never pay as quickly as you’d like.

An Invoice Finance facility can help you keep that cashflow flowing nicely, so you can devote your attentions to chasing new customers, not late payments. Or why not use Asset Finance to acquire that big ticket item you need to take your business to the next level and spread the cost instead of paying the big upfront costs? And where property is involved, a tailored Bridging Loan can help quickly access funding to help with development, refurbishment or even help bridge the gap between a sale and a purchase.


MYTH 4: Borrowing is bad for profit

That depends on why you’re borrowing. If the funding is going to bring you in more money than the cost of borrowing, that’s definitely not ‘bad’.

Strategic borrowing can help you expand your sales orders and increase your customer base – in short, make more profit. Successful businesses know how to use asset-based funding to help them seize the moment. What is bad for business is a lack of investment and letting great opportunities pass you by.


MYTH 5: A bank is the best place to get business funding

When you’re looking to borrow, it’s hardly surprising that the first place that springs to mind is your bank. You already have a relationship with them and well…it can seem easier. Except it’s often not. There are other lenders out there who can offer you more options tailored to your own needs, with more solutions to choose from and quicker access to funds.

Our range of funding solutions offers rates that are fair and completely transparent – and they all come with the personal and dedicated service that keeps seeing us awarded the industry-leading score of 4.9/5 on Trustpilot. If your bank has an unbeatable offering, then great. But if not, talk to us.


MYTH 6: Business funding takes time to approve

It can, but it shouldn’t. For example, we make sure we only ask for the key documents we need to underwrite an application, and we empower our teams with the latest technology to offer a quicker decision without relying on a “computer-says-no” algorithm. We verify identification documents digitally, use Open Banking to review bank statements, and offer electronic signing of contracts so there’s no need to scan or mail important documents, all with a single and dedicated point of contact – making it both quicker and easier to apply for business funding.


MYTH 7: Asset-based lending is only worth it when looking to buy a new asset

Although it is a great solution to purchase new vehicles, plant or machinery, asset-based lending definitely doesn’t stop there. If a business sells to other businesses, chances are they offer credit terms. In that case, their sales ledger becomes one of their biggest assets and Working Capital Finance can help access the cash tied up in their invoices as soon as they are raised. And if they don’t offer credit terms because that would make cashflow management an ordeal, taking on a finance solution can allow them to do so and build better, longer lasting relationships with their existing clients – and take on new ones. Assets take on many forms in asset-based lending: in addition to a sales ledger it could also be property, an existing piece of machinery to refinance against or even stock from a supplier bought using Trade Finance. That’s why we believe asset-based lending is one of the most flexible ways to access funding.


MYTH 8: The pandemic has made borrowing harder

When COVID-19 disrupted the world in March 2020 there was a vast array of unknown and possible consequences we all had to navigate through. To help support businesses, lenders provided Government backed funding through schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS) to ensure they could keep moving through more than unusual trading patterns.

Whilst it would be easy to imagine these conditions led to an increase in declined applications for funding, BVA BDRC reports that 88% of applications between Q1 2020 to Q2 2021 were successful, with 85% offered the facility they wanted.


MYTH 9: Funding will hurt my relationships with clients and suppliers

We understand where that myth comes from – some solutions can make a business owner feel like they’re having to relinquish some control over their finances. For example, some view Invoice Factoring with caution because they’re no longer in charge of collecting due invoices and fear their clients could choose to go with another business if they’re unhappy with the service they receive from the factor.

But what a business always has control over is choosing their provider. Based on their own requirements, some providers may not be the right choice for them and it’s always a good idea to discuss the service levels they can expect should they take on a facility. For example, we let our Invoice Finance clients choose whether they want debtor protection and / or credit control services – they decide how much support they wish to receive, but regardless of the extent of the contract they always benefit from the personal and dedicated service from our expert Relationship Management team.


MYTH 10: Business funding should always be a last resort

This is the biggest myth of all. Over the years we’ve all been hard-wired to equate funding with debt and therefore something that’s ‘bad’.

But access to the right funding solution could be essential for the success of your business.

We don’t think twice about borrowing a lump sum over 25 years to buy a house. Why?

Because we call it a ‘mortgage’ and we accept it as a “good” debt as it is vital to meeting our ambitions of purchasing property. But so is business funding, be it Invoice Finance, Asset Finance, Bridging Finance, or a combination of it all.

Successful businesses don’t see all debt as a bad. To them, it is simply a strategic source of funding. A way to create opportunity and keep their business moving to where they wish to go. Which is what all businesses should be in the business of doing.


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If you would like to talk to us about any funding needs, call us on 0800 121 7757, register as an Introducer or request a quote for your business today