Asset based lending (ABL) is a form of business finance that uses the assets on a company’s balance sheet as security for any type of lending. These assets could include property, stock, machinery, equipment or even accounts receivable.
Any business looking to take out a loan or obtain a line of credit to help meet cash flow needs can utilise ABL. If the business does not have suitable cash or cash assets to cover the loan, then it is possible to consider physical assets as collateral. Of course, the terms for this lending will vary dependent upon the value of the assets. Alongside this will be the varying interest rates available, consideration for this will be given when items such as credit history, cash flow and business age are known.
Some of the most popular ABL deals include business refinancing, the purchasing of a second business and business expansion. A typical example is a large manufacturing company that invoice £1million per month, using both stock and machinery as their assets they can purchase a second business to increase their manufacturing capabilities.
Key benefits of ABL include:
- Flexibility, with only a few restrictions on how you can utilise the funding
- Decisions are often very quick, within a 4-week period
- Clients keep full control, borrowing whilst also keeping hold of all the equity
- Can be used alongside other types of lending
- Repayments can be fixed making it a safe and stable option allowing businesses to accurately plan
- Improve cashflow thanks to the assets of the business
If you have any questions or would like to find out more about asset based lending please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.