One of the major challenges facing business owners today is working capital. Whether businesses need to smooth out revenue cycles, make purchases, cover payroll, or act on growth opportunities, capital is a necessity. The process of taking out a traditional loan takes time, and the high requirements do not always guarantee approval. Additionally, the terms of traditional loans are frequently too restrictive, and place a big strain on revenue. Business owners need flexibility and control, which is why many are turning to asset based loans.
What Are Asset Based Loans?
Asset based loans cover a variety of funding structures. Some are used to improve cash flow, while others create a revolving line of credit. At the heart of asset based loans, the value of items such as receivables, equipment, inventory, and other things owned by a business is used to create a source of capital.
Asset Based Financing for Improved Cash Flow
Most cash flow challenges can be tracked to revenue tied up in unpaid invoices, since most receivables are issued with 30, 60, and even 90-day payment schedules. To correct cash flow issues, businesses use accounts receivable financing. Accounts receivable financing converts unpaid invoices to cash very quickly, so businesses can boost cash flow and accumulate capital reserves to cover expenses and plans for growth.
Asset Based Loans for Working Capital
Asset based loans can also be used to create a source of working capital in the form of a line of credit. After an in-depth analysis of owned assets, the resulting value is used to provide a revolving line of credit. Businesses can then draw upon the asset based line of credit as necessary for anything they need. As the balance is repaid, the amount of financing available is replenished. As the business grows and increases its assets, the line of credit can be reconfigured with a higher spending limit.
Learn More about Asset Based Loans
From accounts receivable financing to lines of credit, businesses across all industries use asset based loans for working capital and to improve cash flow. Nanaki Capital specializes in a number of working capital and asset based solutions. Contact our team today to get started.