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How businesses can get the money they need with asset-based lending

17-06-2024|Anthony Gougeon , Marketing Manager

Businesses come to us looking for a funding partner for many reasons: they are looking to boost their cashflow to help them keep moving, or they are looking to invest in new opportunities, or maybe trying to overcome financial challenges. For all the above and even more, asset-based lending has proven to be a great solution as it offers flexible and tailorable funding solutions that directly address pain points and opportunities.

Asset-based lending is a form of finance that allows businesses to access funding against the value of assets, such as Invoice Finance for receivables (invoices), Asset Finance for stock, vehicles, plant and machinery, or Bridging Finance for property. By using your assets as collateral, you can access funds quickly and easily, without giving up equity or control of your business. And there are plenty other benefits to considering asset-based finance to help a business grow, so whether you are a business owner looking for funding support or an introducer helping clients find the right funding partner, here are eight ways asset-based funding solutions can help businesses achieve their goals.

Improved working capital

One of the main advantages of asset-based lending is that it can improve working capital, which is the difference between current assets and current liabilities, and it defines a business’ ability to meet short-term obligations or fund growth. For example, Invoice Finance can help businesses by unlocking the cash tied up in assets, such as unpaid invoices or unsold stock and use it to cover expenses, pay suppliers, or fund payroll, and Asset Finance by providing access to the funds required to acquire an expensive new asset without parting with hefty sums up front. This way, businesses can avoid gaps in their cashflow and keep running efficiently, and even have access to the liquidity they need to take on new opportunities for growth.

Boosted growth potential

Indeed, another benefit of asset-based lending is that it can boost a business’ growth potential by providing the funds needed to invest in new opportunities, expand operations, or enter new, untapped markets. Asset-based lending can help finance growth plans without diluting ownership or compromising profitability. Moreover, unlike other forms of finance such as traditional loans, some asset-based funding solutions like Invoice Finance for instance do not have fixed repayment terms, but rather adapt to revenue and asset levels. This means that a business can borrow more as it grows and repay less when sales are lower. This way, businesses can grow at their own pace with funding support in place as and when they need it.

Enhanced flexibility

Asset-based lending can also enhance flexibility by allowing you to choose how you use the funds you borrow. Funding accessed via a Working Capital solution like Invoice Finance can be used for a variety of business purposes, such as buying new equipment, hiring new staff, launching a marketing campaign, or acquiring another business. Or if your business is looking to acquire specific new hard assets, an Asset Finance solution can be designed to achieve just this. In most cases, a bespoke finance solution can be tailored to suit your specific needs and objectives, and help manage your cashflow more effectively without many of the restrictions other finance solutions such as loans and overdrafts may impose.

Reduced liquidity risk

Asset-based lending can also reduce liquidity risk by providing businesses with a secure and reliable source of funding and access to tools that protect future operations. Because of its versatility and because it is a more secured form of lending, even some businesses with a short trading history or a seasonal or cyclical trade can be eligible for funding. Furthermore, businesses can also protect against bad debt with Invoice Finance by adding on Debtor Protection, which provides additional peace of mind in case customers fail to pay their invoices.

Saved time and money

Asset-based lending can save time and money by providing businesses with a fast and cost-effective way to access the finance they need to meet their ambitions. Asset-based lending can usually be arranged quickly, as the application process is generally simple and straightforward, and the approval is based mostly on the quality of the assets the finance will be raised against, enabling underwriting outcomes to be quicker in most cases. Depending on business needs, use and facility types, asset-based lending can also be cheaper than other forms of finance with lower interest rates, tailored solutions and even the deferral of VAT repayments when using Asset Finance to acquire a hard asset.

Improved relationships

Asset-based lending can also improve business relationships, helping you to maintain a positive reputation and a strong network. Invoice Finance solutions can help you improve your relationships with your customers by allowing you to offer them longer payment terms, discounts, or incentives, without affecting your cashflow. Trade Finance can also help you improve your relationships with your suppliers, by enabling you to pay them on time, negotiate better deals, or take advantage of bulk discounts. A Bridging Loan can help complete successful property developments within time and budget, helping you to develop great partnerships with contractors and buyers. And Asset Finance could help you access better deals on the purchase of hard assets by enabling you to pay the seller upfront and make monthly repayments to your funding partner.

Increased confidence

Asset-based lending can help business owners increase their confidence, by ensuring that they always have access to the cash they require to meet their obligations, overcome challenges, and seize new opportunities. It also allows owners to keep full equity and control of their business. Finally, additional confidence can be unlocked by partnering with a lender that provides access to expert teams that can support businesses with access to the funding they need but also with added-value propositions. For example, Ultimate Finance offers a wide group of partners it strategically selects to provide clients with additional resources they may need, such as access to financial directors, HR specialists and mentoring programs.

Diversified finance options

Asset-based lending can be used as a standalone finance solution, or as a part of a wider finance package, depending on your needs and preferences. Because asset-based lending is a solution that can be tailored to suit the individual needs of a business rather than a one size-fits-all, it is possible to combine multiple funding facilities to support one or more goals.

A business can access cashflow security through Invoice Finance and use Asset Finance to bring in a key piece of equipment at the same time; a property development business could use Asset Finance to acquire strategic machinery and a Bridging Loan to successfully complete a project. At Ultimate Finance we call it Structured Finance and it allows us to fully tailor a funding solution up to £10m to fit the unique needs of a business.

Asset-based lending can even be combined with other forms of finance, such as overdrafts, loans, or equity, to create a bespoke and flexible finance solution that suits a business.

Get funded with Ultimate Finance

Asset-based lending is a tried and tested way for businesses to unlock new growth potential or access much-needed breathing space to keep moving: at Ultimate Finance we have supported thousands of businesses for over 22 years and have developed the expertise and funding power that help them meet their ambitions. Our tailored funding solutions and relationship-based approach have earned us the leading score of 5 out 5 on independent review website Trustpilot and earned us industry recognition via several awards.

If you are an introducer looking to refer clients to Ultimate Finance, register online in less than a minute today. Alternatively, if you are a business owner looking to find out more about how to get access to our funding solutions, contact us today.

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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