What Are Asset Based Lending
Services
Helping business owners get the cash flow they need.
Asset Based Lending
Types
Benefits
How it works
Sigma Funding
Access the Capital You Need to Grow Your Business
Your business goals shouldn’t be limited by cash flow constraints. Asset-based lending (ABL) offers a flexible, secure way to access the working capital you need to maintain daily operations, fund new projects, or invest in growth opportunities. Designed for businesses of all sizes and sectors, this financial solution uses your tangible and intangible business assets, such as accounts receivable, inventory, or equipment, as collateral to provide funding. With asset-based lending, you can unlock the value of your resources and take your business to the next level.
What is Asset-Based Lending?
Asset-based lending is a type of financing where loans or lines of credit are secured by business assets. Unlike traditional loans that focus primarily on credit history, asset-based lending evaluates the value of your collateral, making it an attractive option for businesses focused on liquidity and capital accessibility. Assets that can be used include accounts receivable, physical assets such as inventory, equipment, fixed assets like commercial property, or even intellectual property.
This model provides a dynamic funding method perfectly suited for businesses seeking financial solutions that adapt to fluctuating cash flow or seasonal demands. Asset-based lending works by leveraging resources often already on your balance sheet, turning them into a source of immediate cash flow.
Key Benefits of Asset-Based Lending
Flexible Financial Solution
Your funding grows as your business assets grow, giving you access to the working capital necessary for scaling operations.
Improved Cash Flow
Convert business assets like accounts receivable or inventory into immediate liquidity. Asset-based loans help stabilize your operations by reducing cash flow gaps.
Quick Access to Funding
Compared to traditional banking solutions, ABL provides faster funding. Since the loan amount is based on asset values rather than extensive credit checks, approvals are often swifter and less cumbersome.
Support for Business Growth
With consistent access to capital, you can expand teams, explore new markets, or invest in equipment and technology projects without the delays of traditional loan approvals.
No Need for Unsecured Loans
By securing loans through assets, businesses can often qualify for higher funding amounts than they might with unsecured loans, which rely heavily on creditworthiness.
How Asset-Based Lending Works
Here’s a closer look at the process of asset-based lending, simplifying this powerful financing option into manageable steps:
Asset Evaluation
A lender begins by evaluating your existing assets. This assessment typically includes accounts receivable, inventory, or fixed assets to determine their current market value and potential as loan collateral.
Loan Offer
Based on the evaluation, the lender makes an offer that includes a proposed funding amount, interest rates, and terms. The funding amount usually reflects a percentage of your asset value, ensuring financial security for both parties.
Collateral Agreement
You agree to use the evaluated assets as collateral for the loan. This formal agreement secures the borrowed amount and protects the lender from potential repayment risks..
Loan Disbursement
Once the agreement is finalized, the loan amount is disbursed directly to your business. You can use these funds to improve cash flow, finance acquisitions, invest in equipment, or expand operations.
Repayment
Over time, you repay the amount as per the agreed schedule, including any associated interest costs. Both cash flow management and consistent financial reporting are crucial for successfully maintaining the loan.
Choosing the Right Asset-Based Lender
The success of asset-based finance depends on partnering with a lender experienced in supporting businesses of your industry and scale. Consider the following when evaluating your options:
Reputation
An able asset-based lender should have a proven history of working with businesses across different sectors. Seek references or testimonials highlighting their expertise.
Customer Service Accessibility
A lender that provides continuous support is invaluable in simplifying the borrowing process and addressing challenges along the way.
Competitive Terms and Interest Rates
Comparing offers will help ensure you secure a suitable funding amount with reasonable interest costs.
Flexibility
Look for providers that offer tailored funding solutions like invoice discounting or revolving credit facilities.
Risks and Considerations of Asset-Based Lending
While asset-based finance provides numerous benefits, businesses must carefully weigh its potential risks to make informed decisions. Key considerations include:
Collateral Risk
Defaulting on the loan may lead to the seizure of pledged assets, making repayment planning critical.
Fluctuating Asset Values
The changing market value of certain assets, like stock or equipment, might affect available borrowing amounts. Regular evaluations are necessary.
Additional Costs
Often, asset-based lending incurs fees, such as origination or maintenance charges, which should be considered when calculating cost prices.
Interest Rates
Compared to traditional loans, interest rates for ABL are often higher, reflecting the specialized nature of asset-based lending.
Intensive Reporting Requirements
Lenders may request frequent audits or reviews of your financial statements to ensure collateral values remain consistent.
Businesses should prepare and maintain adequate financial documentation to mitigate these challenges and secure favorable terms.
Why Choose Us?
At Sigma Funding Group we specialize in delivering customized asset-based lending solutions designed to meet your unique needs. Businesses that partner with us gain access to the following benefits:
Quick Processing Times
From approval to funding, we help you access the capital you need without delays.Expert Guidance
Our team works closely with you, helping determine the right financial products for immediate liquidity or long-term investment.Transparent Terms
You’ll never be caught off guard by hidden fees or misleading offers. Our terms are clear from the start.
Eligibility Criteria for Asset-Based Lending
Not all businesses are immediately eligible for asset-based lending. Here’s what many lenders look for when assessing candidates:
Valuable Business Assets
Companies need substantial and assessable collateral, such as accounts receivable, high-value inventory, or expensive equipment.
Stable Operations
Established businesses with a proven track record and consistent performance are often preferred by asset-based lenders.
Comprehensive Financial Records
Financial transparency is essential. Companies should provide accurate balance sheets, detailed cash flow reports, and clear asset valuations.
Creditworthiness
While ABL focuses primarily on collateral, lenders may still assess credit scores or financial stability to evaluate repayment ability.
Asset-based lending is particularly beneficial for manufacturers, wholesalers, or businesses in other sectors with large accounts receivable or high-value stock. Startups may face challenges due to limited collateral but could explore options like invoice discounting providers for smaller funding solutions.
Start Building Your Financial Future Today
Don’t wait for traditional financing hurdles to be cleared. Asset-based lending offers a fast, flexible way to access the working capital your business needs to thrive.
Unlock the value of your assets today. Contact Us and take deliberate steps toward securing funding that supports your operations, clients, and long-term goals.
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