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Asset-Based Lending and Restrictions (or Not)

Last Modified : Jul 10, 2024

Fact-checked by: Bruce Sayer

Today, more than ever before, we are witnessing how asset-based lending (ABL) has become an increasingly popular way of financing, which is due in large part to its flexible structure and fewer restrictions. This is especially helpful and worth knowing when you consider that your business plans may need to change.

Here we detail the many flexible options that come with asset-based lending.

ABL focuses on asset value instead of performance ratios

As we mentioned above, ABL loans are based on the value of your assets. But how in fact, can an asset-based loan have fewer restrictions? Well, what do the lenders behind a traditional bank loan value? Answer: Cash, and getting it back with interest. An asset-based loan (just like the term implies) is a line of credit that places greater value on the assets of a business as opposed to cash-flow ratios.

If you, as a potential borrower (or “partner,” which is how we at eCapital would consider you), apply for an asset-based loan, you would withdraw the funds as you need them, so you are not paying interest on anything you don’t need. There is also the added flexibility of getting more funding as you grow. You will have greater peace of mind and be more productive and of service to your employees and customers – which is perhaps your greatest priority of all.

Ability to fund outside-the-box solutions

With assets as collateral, lenders can devise more creative and personalized “outside-the-box” solutions that are easier to manage and control. This arrangement works particularly well for businesses in the food and beverage industry that experience seasonal off-cycles as well as ecommerce businesses that require more creative and proactive financing solutions.

Shorter turnaround times

Since the lines of communication are shorter, ABL lenders can react more quickly. For example, if a large, unplanned opportunity presents itself to your business, an ABL lender can react quickly and get you the financing you need to pursue that opportunity. This gives you, as a business owner, the confidence to go out and pursue new business/products that you might not typically go after. That’s because you know you will get the funding from an ABL lender. Traditional banks, on the other hand, don’t secure the funding until after the new opportunity is a done deal. This leaves you going into the deal blindly and not knowing if you’ll actually get the funding you need. The ability for traditional banks to grow with you can take very long within the business cycle. An ABL model is more instantaneous. The financing is available when you need it.

Summing it up

Time and again, we at eCapital have explained the benefits of asset-based lending. (Hey, it’s our specialty.) From the protection of a business’ equity to the great flexibility  it provides, an asset-based loan lightens the worries customers might have if they choose a more traditional option. If the freedom an asset-based loan provides sounds too good to be true – it’s not! It’s all good and all true.

 

ABOUT eCapital

Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.

We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.

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eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.

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