Asset-based lending has many benefits to businesses. One benefit—perhaps the most important—is the available flexibility to unlock your growth and ensure you reach your goals. Whatever the reason—whether to diversify the services you offer, grow or launch a new product line, expand to brand-new markets, pay suppliers, or keep that amazing team of yours—asset-based lending offers funding that is delivered quickly and adapts to the growing needs for your business.
Here, we list out how asset-based lending allows your company to either manage rapid growth or position itself for growth.
A creative form of lending
Asset-based lending is a creative form of debt financing that allows you to secure a loan based on the value of your business assets, such as accounts receivable, inventory, machine and equipment, real estate and even intellectual property. This differs from traditional bank loans, which are based predominantly on the stability of a company’s cash flow ratios—and which can be harder to maintain. In short, by choosing asset-based lending over a traditional bank, you have more creativity with how you use your credit line to ensure you are growing quickly.
If you’re looking to speak to potential finance partners, we at Gerber Finance have compiled a list of questions to ask potential lender.
Have funds when you need it
With asset-based lending, you are borrowing in the form of a revolving credit line—which is ideal, because you can use those funds whenever you need money. This helps accelerate your cash flow cycle and creates flexible working capital to fund your company and keep it thriving. And, if you experience unexpected growth and need to purchase additional inventory or pay suppliers quickly, asset-based lending also allows you to do that. That’s because there are no strict covenants that cause delays in accessing the funds when you need it.
Adaptable to your business plans
Unlike traditional loans, asset-based loans can be customized to meet your specific business needs. Let’s say your growth plan changes while you have a credit line in place. How do you pivot? With asset-based lending, all it requires is an honest conversation with your lender. You both can work together to create a plan that works to keep your business growing. Remember: You are not locked into any “one growth” initiative.
Flexible to your needs
With asset-based lending, funding is delivered quickly with flexible covenants. Since your assets are your collateral, there is maximum liquidity and fewer rules. Overall, this is an extremely flexible solution that bridges the buy-and-sell in your business so that you can accelerate your sales cycle. As your assets grow, your line grows.
How PTAG used asset-based lending to grow
PTAG, a capital project consulting firm and long-term partner of ours, was able to solve a host of challenges—as well as achieve growth—with an asset-based lending line of credit. A few years ago, due to a market crash, PTAG had to stop expenditures of oil and gas and focus heavily on consulting. Through this change, they needed financial help. Thanks to asset-based lending, PTAG was able to balance their books, create tighter controls, and became motivated to maintain their goals. Not only did they have the flexibility to invest in oil and gas, but they were able to successfully expand their services to mining, nuclear energy, renewable energy, and heavy infrastructure in its specialties. So, while diversification is difficult, PTAG pulled it off—with growth.
Shannon Sahota, PTAG’s Chief Financial Officer, loved the flexible options that were provided in an asset-based loan, and she was particularly impressed of how there was no “fear factor” that might be sensed from working with a traditional bank.
Listen to our full conversation with Shannon on our podcast, “Unlocking Growth with Asset-Based Lending,” to learn more about the goals PTAG accomplished and her role as a female CFO.