Asset-based Lending for SME

Many SME entities are increasingly finding the financing regulations of banks too limiting. Banks have a cap on the amounts they are willing to lend out to SMEs. For the amounts they are willing to lend to SMEs banks, they usually ask for more personal security against the loan which comes with higher processing fees. Because of these factors, SMEs must look elsewhere for funding for their businesses. Alternative sources of funding have stepped up to fill this vacuum with flexible terms of lending such as the asset-based lending facility. Doug Foshee financial company helps to grow small businesses using fair loans and investments.

Many SMEs do not have much liquid cash in their initial stages but they do have most of the capital in their assets. Some of the assets include the business plant and machinery, property and stock. Asset based lending uses the value of cash tied up to these assets to provide a fast source of substantial cash for businesses. Thus, businesses in search of more working capital can fully utilize the potential value of their assets to gain more liquidity with which they can pursue further growth.

Asset-based financing incorporates Invoice Discounting, which offers business owners an immediate source of cash. There are varying amounts of attributed to each type of asset. Therefore, because specific values are attached to plant & machinery, stock and property, there are different loan amounts for each asset which then makes up the total funding program. The value of each individual asset is determined on its individual transaction basis. Advanced funding can be availed to businesses based on an agreed percentage of the assets’ value. Thus, SMEs with a good number of assets can get some good funding for their businesses with asset based lending.

Asset-based lending is the ideal source of funds for most SMEs due to the following:

(1) It improves the liquidity of your SME. Many businesses have been able to access higher levels of funding because of asset-based financing. The Invoice Finance feature can be made use of during times when there is less liquidity and when the cash flow is volatile.
(2) It is the best way to finance various avenues of business growth. These include scenarios such as business restructures, mergers & acquisitions MBOs and MBIs. This is because it is tailored depending on your business needs.
(3) A business will raise more money through asset-based financing than through other types of loan facilities. Asset-based lenders are privy to the risks associated with assets and can thus willingly lend depending on the business’ needs. As the business assets continue to appreciate in value, the value if the facility also increases. This means the business’ working capital will grow in line with it.