By: David S. Yanagisawa
As the economy improves, small businesses may find they need quicker access to cash to rebuild levels of inventory. They may have a project or opportunity on the horizon but might be short on cash to complete it. Asset-based lending could be the right solution.
According to the Commercial Finance Association’s Q3 ABL Lending Index
, asset-based lenders continue to increase new credit commitments and are helping fuel the availability of working capital for businesses emerging from the recession.
Asset-based lending business solutions are available for growth-oriented companies, seasonal businesses, leveraged buyouts and companies with continuous external working capital requirements.
Companies use their collateral – accounts receivable, inventory, equipment and other assets – as pledges to qualify for asset-based loans.
An asset-based loan (ABL) has an approved revolving credit limit with availability based on the company’s actual accounts receivable and/or inventory balances. ABL rates are generally higher than those of traditional loans, but proper use of an ABL facility when capital is tight or expensive results in a worthwhile relationship.
For those with companies whose financial performance has been impacted by the recession but that have solid core assets of accounts receivable and inventory and need money in order to grow, an ABL may be the right solution. For small businesses needing a bridge between their sales and the collection of receivables, ABLs are a viable answer.