Why Startup Businesses Use Asset Based Lending

January 12, 2017 by CNH Finance, LP in category “Financing”

Startup businesses are known for their lean and agile business models. However, startup businesses also need financing to get established, and to grow in competitive markets. For various reasons, traditional lenders have become less inclined to approve loans for new businesses. By using asset based lending, startup businesses can get the initial funding they need, plus access to larger financing resources.

Applying For Traditional Loans

When startup businesses apply for traditional loans, lenders have specific requirements. First, they want to see a strong business credit history. Second, lenders require a strong history of sales. In lieu of that, they will accept and established record of borrowing and repaying previous loans. Finally, traditional loans require some form of collateral, which can be used to create debt financing. Collateral usually consists of any assets owned by the business or its owners. If approved, debt is placed on the balance sheets, and capital is disbursed to the business. Should the business default on any repayments, the lender has the right to seize any of the assets used as collateral against the loan.

Startup Businesses Can Use Assets Differently

Instead of taking on debt right from the beginning, startup businesses can leverage assets to create a sizable line of credit. Asset based lending offers a number of advantages to startups, such as a revolving line of credit without the high requirements of traditional loans, nor the high interest rates conventional channels charge for startup loans. Asset based lending also takes into account much more than traditional lenders do when tallying possible sources of collateral. Instead of creating debt, asset based lending looks at equipment, inventory, receivables, vehicles, real estate, and many other items to create a robust and versatile revolving line of credit which startup businesses can use for hiring staff to running marketing campaigns, acquisitions, and everything in between.

Paving The Way To Larger Financing

By using asset based lending, startup businesses can build up credit ratings very quickly. In doing so, entrepreneurs will be able to access even larger financing options for transactions such as rolling out new products and services, expansion into larger facilities, and leveraged buyouts. Additionally, as the startup grows, so too does the spending limit on the asset based line of credit.

Get The Financing You Need Without The Debt

If you are launching a startup business, asset based lending can provide the capital needed to get things up and running, as well as long-term funding for growth. CNH Finance is committed to providing the best asset based lending solutions locally and nationwide. Contact our offices today and put our services to work for your business.

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