Asset Based Lending Vs. Business Loans: Which Is Better?

January 5, 2017 by CNH Finance, LP in category “Financing”

Business loans have been in existence for as long as anyone can remember. They have become a staple for entrepreneurs everywhere, and are usually the “go to” method for short-term finance. However, business loans have their own set of drawbacks, and entrepreneurs are starting to turn to asset based lending as a more flexible alternative that promotes long-term growth.

Business Loans Only Go So Far

Business loans offer a finite amount of working capital. When that capital is used, two things happen. First, if more capital is needed, business owners need to take out more loans. Second, business owners are left repaying debt with interest, and their credit ratings are compromised. For businesses trying to position themselves for growth, budgeting loan payments can make the road longer than expected. The payment schedule from business loans can put a financial strain on small business owners, especially if sales are particularly light in a given month. Loan payments must be made, but that can leave some small business owners dipping into personal finances to keep the bank happy, and keep operations running.

Asset Based Lending Provides Renewable Funding

Asset based lending creates a revolving line of business credit around the value of inventory, equipment, receivables, and other property owned by your business. Your business can access this line of credit as needed, instead of having to take the total amount, as with business loans. Asset based lending also does not place any debt on the balance sheets. Instead, it is treated as a regular line of credit. As the business accesses capital, it must be replenished, but it can be accessed over and over again, as needed. Additionally, as your business grows, and receivables and other assets increase, the spending limit on the line of credit will also increase. Asset based lending actually helps businesses achieve growth much faster than traditional business loans.

Get The Right Financing For Your Business

At CNH Finance, we believe that businesses should be able to grow without being held back by debt. Because of this, we provide debt-free asset based lending solutions to businesses across all industries. Whether your business is just launching, or you want to position yourself for growth, call our offices. We will go over assets that most traditional lenders overlook, to create a customized financing program to help you reach your goals.

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