In the world of business, getting ahead requires many things: a good support network, great ideas, innovative technology, patience, persistence, and a little bit of luck are some of the primary things needed for business success. However the biggest thing that anyone who wants to exceed in business needs is capital. Money, money, money. It doesn’t grow on trees, it makes the world go ’round, it is the genesis of all vice, and the seed for the greatest virtue. But it is and always has been the biggest obstacle for folks wanting to get started in the world of big business. For businesses which have ‘things’ but just have run into a ditch for securing capital, there is another way. Asset-based finance is the name of the game and getting semi-established businesses money is it’s game. But what is asset-based finance? What type of assets can even work as financing? Where does one procure asset-based finance? All excellent questions which need an answer to make asset-based finance your businesses reality.
As the name implies, asset-based finance involves your putting up your stuff in exchange for funding. From Investopedia, asset-based finance is described as “A specialized method of providing structured working capital and term loans that are secured by accounts receivable, inventory, machinery, equipment and/or real estate.” So these assets can be a variety of things, not just products.
As one would imagine, asset-based finance is a great type of funding for a great variety of businesses. Asset-based finance works “…great for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, and management buy-outs (MBOs) and buy-ins (MBIs).”
Okay, so I’ve got this ‘stuff’ which has some value to someone, so how does asset-based finance work? Maybe not how you’d expect. According to Investopedia, “The asset-based lender finances the purchase of the raw material, and the purchase orders are then assigned to the lender. After the orders are filled, payment is made to the lender, and the lender then deducts its cost and fees and remits the balance to the company.”
So where does one with an impressive looking accounts receivable spreadsheet go to get this illusive funding? Well if your bank doesn’t offer asset-based funding there are asset-based lender services where people can go to get this type of funding. What’s the catch? Well aside from having to be approved for it, asset-based funding can be costly. According to Investopedia, “as high as prime plus 10%.”
But if you’ve got the resources and a dream, you can make your dream a reality. Using asset-based funding can help to make your dreams come true and make you far more than that prime plus 10%.