Business Acquisitions: Why Asset Based Lending Is Necessary For Success

February 23, 2017 by CNH Finance, LP in category “Financing”

Every industry experiences natural selection, to a degree. Businesses merge, buyouts occur, and the end result is usually a better company. However, business acquisitions are delicate and time-sensitive matters. On top of everything business acquisitions require access to working capital.

Using You Assets During Business Acquisitions

While larger financing, such as major loans, are still in the pipeline during business acquisitions, business owners still need working capital to cover regular operations. Many business acquisitions go south because of the financial strain placed on payroll, production, stock, and preparations needed to ensure the transition to a larger overall organization goes smoothly. By using asset based lending, businesses can create an extra source of working capital without generating extra debt.

How Asset Based Lending Works

Asset based lending is a revolving business line of credit structured around the value of equipment, inventory, receivables, and more. Just like any other revolving line of credit, the funding provided by assets based lending can be used as necessary, rather than all at once, and then replenished later on.

Business Acquisitions Increase Asset Based Lending

After an acquisition is finalized, the big transition phase begins. With the ability to service a larger customer base, or increase production and delivery pipelines, the business will need increased amounts of working capital. Fortunately, the acquired business typically comes with assets. These assets can be used to increase the spending limit on the existing asset based line of credit, thereby providing more available working capital. Additionally, as receivables improve after the acquisition, asset based lending will continue to grow.

Using Asset Based Lending

Large loans can help with a buyout or merger, but what about the immediate expenses? The everyday operations still require purchases. The acquisition, especially if you are moving into larger facilities, will need to be outfitted so your employees can move in without skipping a beat. Asset based lending can cover those expenses without placing a strain on finances or cash flow.

Make Your Acquisition Smooth And Painless

If you are about to acquire another business, and want to make certain your cash reserves are flush throughout the entire process, call CNH Finance. We will assess your owned assets before the acquisition, and then after the agreement is finalized to give you the highest value and create the best asset based financing strategy available. Contact our offices today.

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