In the life of any business, there will be moments wherein cash flow is restrictive and you would need to borrow money to stay afloat. For the business to be set up in the first place, it is highly likely that some amount of money had to be borrowed. After all, it takes time for your investment to grow and for your capital to reap the rewards.
There will be many instances wherein you will need additional sources of funding, and this is where ABL loans come in. Asset based lending looks into your current assets and gives you additional cash flow based on the value of these assets.
Lenders could look at any of the available assets in your balance sheet, but typically, the loans available are the ones tied to your accounts receivable, equipment, real estate, and inventory. ABL lending gives companies flexibility and versatility, providing immediate cash flow as soon as the need arises.
But who usually needs asset-based lending? To understand this, we need to take a closer look at the many uses of ABL loans:
- Additional Working Capital
Working capital is the most common reason why companies need to take advantage of asset based lending. Particularly for those companies with very high receivables, an ABL loan will free up a lot of cash flow to be used for other more important aspects of the business.
The problem with having too much money tied up in receivables is that you barely have enough left for the day-to-day operations of your company. How much more for expenses that are important in establishing your company’s future?
When a company wants to grow and expand its operations, ABL lending will come in handy. This is because you’ll need additional money for capital expenditures, which may include additional equipment or machinery, an upgrade in physical assets, acquiring additional store space, and others. All of these expenses will require that you also have additional cash flow, and this is where your ABL loan can truly help out.
- Mergers & Acquisitions
Sometimes, the most logical thing to do to move up is to acquire another business or entity. But mergers & acquisitions, as sassy as they sound, require a lot of additional capital. You can’t buy another business if your money is tied up elsewhere, and this is why ABL loans can be the perfect solution.
When a business is not doing too well, you’ll need turnaround financing to revamp operations and give your business the boost that it badly needs. The reason why asset-based lending is most ideal for this type of scenario is that an ABL loan typically offers more flexibility compared to the usual loan options offered by banks.
- Stabilizing Seasonal Sales
For some industries, sales can become very seasonal. This means that there will be instances in the year wherein sales are very low, and you will have to wait months before the figures pick up again. ABL loans are there to help stabilize the seasonality of your products and services so you can still have sufficient funding to survive until your sales figures go up.
If you need an ABL loan, we’d be happy to help you. Please check out our website: www.neebocapital.com for more information about our services.