Asset-Based Lending

Last updated: 15/11/2024

What is Asset Based Lending?

Asset-based lending is a form of asset-based finance that uses assets on your balance sheet as security against business lending.

This includes business assets such as debtors, stock, equipment, machinery and property.

Asset-based lending can provide businesses with the capital they need to fund growth and expansion, purchase inventory, or cover operating costs. This provides a business with flexible and adaptable funding tailored to clients’ requirements. 

Types of asset-based lending?

There are several types of asset-based lending, including:

1. Invoice Discounting: This improves your businesses cashflow by gaining access to cash linked to the sales invoices you raise.
2. Accounts Receivable Financing: This allows companies to borrow funds based on their outstanding invoices. 
3. Inventory/ Stocking Financing: This allows businesses to borrow funds based on the value of their inventory. (eg. Stock) 
4. Plant and Machinery Financing: This allows businesses to borrow funds based on the value of their equipment (e.g., cranes, vehicles, and IT equipment) within the business.
5. Equipment Financing: This allows businesses to borrow funds based on the value of their equipment (eg. cranes, vehicles and IT equipment) within the business.
6. Property Financing: This allows businesses to borrow funds based on the value of any property the company owns. 

Advantages of asset-based lending

Some of the advantages of using asset-based lending are:

• Clients keep full control
• Maximise borrowing capability
• Improve business cashflow by leveraging the value of unencumbered assets.
• Can be used alongside several types of lending like hire purchase, invoice finance or finance lease.
• Funding decisions are generally quick

Is asset-based lending right for your business?

Some key things to think about when considering an asset-based lending solution are;

1. Does your current funding structure give the business flexibility? – Asset-based lending provides a dynamic solution with very few restrictions.
2. Does your business need cash? – Asset-based solutions can be secured quickly and without excessive documentation. This is excellent for businesses that needs immediate funding as they may be approved and receive funds swiftly. In addition, companies often seek asset-based loans to keep up with day-to-day operation costs where time is of the essence. 
3. Is your bank saying no? – During tough financial times, traditional bank loans are more challenging to secure, and banks may reduce lines of credit based on recent business performance. Companies can sidestep some of this business cycle volatility with an asset-based loan by leveraging solid assets for a much-needed influx of cash.
4. How much does it cost? – While asset-based loans typically do not offer as favourable interest rates as standard bank loans, they are lower than unsecured loans.
5. Are there lots of hoops to go through? – Many companies find asset-based loans more flexible than traditional bank loans. Since the loan is tied to assets rather than cash flow, they can expand their options when making business decisions without relying on current financials. 

How to apply for asset-based lending 

MAF Finance Group can compare finance offerings from a wide panel of lenders to find the best option for you.

If you would like to get a quote or need further information, simply fill in the form and we will contact you. If you want to speak to someone directly, you can call us on 0115 958 6872 and a member of our team will be happy to speak to you. Alternatively, email us at [email protected].