4 Creative Ways to Use Asset-Based Lending

by Tyler Heap, Chief Credit Officer

Asset-based lending is a more flexible, wide-ranging strategy for business financing as compared to many other standard methods.

When your business works with a dependable financial institution that offers asset-based lending, it can tap a number of resources to use as financing collateral. From accounts receivable and inventory to some forms of equipment, as well as standard considerations such as your cash flow and balance sheet, asset-based lending allows your company to take a broader approach to accessing the funds it needs to stabilize, grow and prosper.

This personalized approach to financing can help your business address a number of potential issues and opportunities. Let’s look at four ways your organization can get creative with asset-based funding.

1. Tapping into new technology and tools

Modern organizations rely on effective technology and tools to get the job done quickly and consistently - and to stay ahead of the competition. Whether it’s a specialized machine used in a tightly controlled manufacturing process or planning and management software applicable across the business world, there are many opportunities to introduce powerful new systems and equipment that can improve outcomes and, ultimately, your bottom line.

Knowing that a certain tool or type of machine can help your organization isn’t enough to bring it into the fold, however. The costs associated with acquisition, implementation, training and similar needs can deter companies, even when the long-term results include significantly lower costs or opportunities for improved revenue. Asset-based lending can provide the financial bridge between a new resource with proven value but a significant cost and the benefits you know it can provide.

2. Finding the best possible location

The space your business operates in can have a major impact on its fortunes. Whether it’s enough room and the right layout for efficient, consistent production or proximity to major highways, a desirable location can make a variety of core business processes easier. Locating that facility and moving into it can be the first step toward business development.

Real estate is often expensive, of course, and the many costs associated with relocating staff, equipment and other assets only add to the price tag. You don’t want to overextend your business’s finances to facilitate a move, then have to deal with an emergency without enough available working capital. Asset-based lending can ensure your company has the necessary funding in place to make this transition a smooth one, paying for the costs of the new location itself as well as moving expenses and the cash crunch that can come with a potential delay of selling your old facilities.

3. Proactively smoothing over working capital concerns

You know how complicated the flow of money into and out of your business can be. Even when you’re steadily supplying customers with products or services and keep operational costs low, there can be significant slowdowns in payment. Standards for accounts receivable payments in your industry could involve a wait of a few days or weeks, or as much as 90 days in select cases. Delays like can be manageable for established companies and those with strong relationships with customers, but can be especially problematic for businesses that are just starting out or rely on a high-value, low-volume model.

Asset-based lending can smooth over the low points when it comes to available working capital, giving your organization the funds needed to keep operating steadily and continue to do the work necessary for maintaining customer satisfaction and adhering to deadlines. With a steady source of working capital in place, your business has a clearer path toward stability and growth.

4. Diversifying operations

Expansion is a goal for a wide variety of enterprises large and small, new and old. Expanding into a related area where demand exists but your company can’t currently compete can help open new revenue streams and make your business more valuable to current and new customers alike. And when your organization has multiple services or products to offer, it’s easier to weather a temporary downturn in a specific area.

Diversifying can include any number of costs, from increasing inventory levels to bringing on more staff members and training existing ones in new processes and workflows. The costs of this type of expansion can dissuade businesses even when they’ve carefully analyzed the situation and know there’s a clear path to improved outcomes. Asset-based lending gives your business the money necessary to diversify operations, ensuring that a thoughtfully developed plan can be reliably executed.

Finding the right partner for asset-based lending

There are many providers of asset-based lending and similar business financing options operating in the world of finance. While all reputable lenders adhere to basic standards, there are other distinctions that can impact the overall experience of partnering with one of them.

TAB Bank has decades of experience operating as both a lender and financial institution, offering an especially high degree of insight into business financing and how companies can best use it to achieve their goals. We also prioritize strong relationships with each and every client, ensuring close oversight and providing guidance when needed. Learn more about our asset-based lending program and get in touch with us to discover all of the benefits of partnering with a dependable business lender.

If you are looking for even more information regarding Asset-Based Lending, take a look at our eBook titled, The Unsung Value of Effective Asset Management.  Click on the tile below to download this valued resource.


The Unsung Value of Effective Asset Management

About the Author

Tyler Heap

Tyler has spent his career analyzing businesses from both an owner’s and lender’s perspective. His love for small business and the entrepreneur budded as he co-founded a business in college which paid for his education and resulted in the sale of the company shortly after graduation. Tyler worked for a manufacturer and distributor of sporting goods after graduating from college, where he managed the company’s finances and investor relationships. His banking career includes vast experience in relationship, portfolio, distressed loan, and underwriting management.<br><br>In his current role, Tyler is responsible for leading the underwriting, special assets, and collateral monitoring teams in conjunction with managing overall credit quality at TAB Bank. He received a double Bachelor of Finance and Economics from Utah State University. Over the years he has been an active participant in the International Factoring Association, Commercial Finance Association, Utah Bankers Association, and the Pacific Coast Banking School. Tyler is also an active member of his community through volunteering and donating to local charities, schools, and special cause groups.

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