There are few things that are more challenging and rewarding as launching your own business. Thanks to the internet, there are more opportunities than ever for would-be entrepreneurs to turn a good idea into a way to make a living, but in order to realize their dreams, they’ll need financing. Here at The Commercial Finance Group in Atlanta, we take great pride in the fact that we’ve helped scores of small to mid-sized businesses achieve their growth goals through our asset-based lending solutions. Keep reading to learn more about how the benefits of asset-based lending stack up against another kind of financing, called cash-flow lending, and contact CFG today with any questions you may have.
There Are No One-Size-Fits-All Financing Solutions
One lesson we’ve learned over and over in our time as a small business lending provider is that there’s no such thing as a one-size-fits-all lending solution. What works for one company experiencing a period of growth might not be right for another company which is currently struggling to find working capital. Unfortunately, one-size-fits-all commercial loans are all you’re likely to find at a traditional financial institution. If you don’t fit the mold and aren’t able to jump through all of their hoops, you’ll be deemed “unbankable” and told to seek other options. Well, The Commercial Finance Group specializes in these other options. We can help, even when others can’t. Let’s look at two ways we do this.
Cash-Flow Lending
When a financial institution provides a loan to a business on the condition that it be backed by that business’s cash flow, it’s known as cash-flow lending. In short, a bank allows the company to borrow money from revenues that have not yet been brought into the business based on past revenues and future projections. As there is a significant element of risk in cash-flow lending, most financial institutions only extend the option to businesses that have stellar credit ratings.
Cash-flow lending is a particularly attractive option for companies that are trying to meet payroll obligations during a slow season or while waiting for a particularly large client to pay their invoice for services rendered.
Some things you should know about cash-flow lending:
- No collateral is required
- Funding can be delivered much faster than collateral-backed loans
- It’s best suited to companies that maintain balance sheets with high margins, or rapidly-growing companies that lack hard assets
- Interest rates for these loans are typically higher than other commercial loans
Asset-Based Lending
When a financial institution provides a money to a business on the condition that said business puts up assets as collateral. These assets can come in many forms, the only stipulation is that they be comparable to the value of the loan and able to be liquidated by the financial institution in the event that the business can’t pay back its debt. Asset-based lending can utilize many different types of assets as collateral, including both tangible and intangible assets. The most common examples are real estate, company inventory, accounts receivable, or equipment.
Asset-based lending is a particularly attractive option for companies that have volatile cash flow, are looking to borrow a larger amount, or are experiencing a slump in growth.
Some things you should know about asset-based lending:
- Collateral is required, even if it isn’t tangible
- It’s best suited for companies that required capital to operate and grow, despite lackluster cash flow potentials
- Amount of financing you can obtain depends on company credit rating and the face value of accounts receivable
- Some institutions may employ a lengthy due diligence process, depending on the assets used
The Commercial Finance Group Offers Small Business Lending Products
As mentioned previously, CFG specializes in customized lending solutions for small to mid-sized businesses. Asset-based lending is only one of the options that we can provide for a company that’s experiencing cash flow issues or looking to free up working capital for expansion. The bottom line is that you need to choose the lending solution that’s right for your particular company and set of circumstances, not just picking the least-awful option from a bank’s menu of services.
If you’re wondering whether or not your company might be a good candidate for asset-based lending, please feel free to contact us today. We’ll be able to walk you through the differences between all the services we provide and make recommendations for the type of lending we think would be best for your situation.
