Following the financial crash of 2008, banks have significantly tightened their lending criteria. If your company is established and profitable, with comprehensive paperwork, you stand a good chance of obtaining a bank loan. If you fail to meet any of those criteria, the outcome could be quite different. Enter asset finance.
What is asset finance?
In simple terms, asset finance – also known as asset-based lending – allows you to borrow against the value of your company’s assets. As such, your eligibility is determined by what you own, not what you owe, how much profit you make or how long you have been in business. The asset in question can be just about anything, so long as it is acceptable to the lender – premises, plant, equipment, stock, even accounts receivable. As a result, you stand a very good chance of being accepted.
Why do businesses opt for asset finance?
First and foremost, many companies choose asset-based lending because they have had bad experiences with banks. However, in some cases asset finance can be a better choice full stop, even if a bank loan is also on the table. Here are a few circumstances in which asset finance could be your best bet:
1 You’re growing rapidly
Whereas banks tend to obsess over past performance, alternative lenders are generally more interested in the future. If you can demonstrate excellent prospects, they will build a close relationship with you in order to understand your needs, and will offer a high level of flexibility with regard to your borrowing requirements.
2 You have a poor credit history
When you borrow from a bank, your credit rating will dictate whether or not you are accepted – and of course, the level of interest you will be charged. If you have a few blips in your payment history, finance could be particularly difficult to obtain – but provided you have assets to use as collateral, an alternative lender won’t be too worried about your background.
3 You want to leverage your assets
If you have some valuable assets to hand, it makes sense to make them work for you. Whether it’s premises, machinery or equipment, inventory or outstanding invoices, your assets can help your business power ahead if you use them as collateral.
4 You want to reduce your personal risk
When borrowers with young businesses or average credit histories seek a bank loan, they’re sometimes offered the finance they need – but only on the condition that they sign a personal guarantee. Put up your home as collateral for a loan and you could find your family out on the streets if business takes a downturn. With asset finance, the only thing you risk is a company asset.
Cashsolv are specialists in asset-based finance, and we’re extremely flexible about collateral. If you need to borrow to take your business to the next level, make us your first port of call and discover what we can do to help you get ahead. To learn more about our asset-based finance services, please visit our page.