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What is asset-based lending, and can it benefit your business?

On Behalf of | Jul 13, 2018 | Business Formation & Planning |

Are the financing options short and unattractive if your Connecticut business is at an incipient stage and lacking a proven credit history that lenders can rely upon? And does that also hold true for an already established company that has taken some hard competitive hits and is now dealing with serious restructuring issues?

Short answer: not necessarily.

One immediately hopeful point that any experienced business law attorney can communicate to a commercial client is that the American commercial sphere is broad and creative when it comes to financing options. A lack of cash in the company coffers that can be earmarked toward loan repayments does not automatically doom a business owner’s attempt to secure an attractive financing outcome from a lender.

Take companies that are short on cash but long on inventory, for example. Their assets on hand can often readily serve as strong bargaining chips when it comes to negotiating financing for business growth or restructuring.

In fact, so-called asset-based lending can be a most attractive option for companies seeking to secure a revolving line of credit. Moreover, asset-based financing can often secure repayment rates that are appreciably lower than those typically offered by mainstream lenders based on a client’s ongoing cash flow.

The reason why is simple, to wit: A lender seeking to call in a debt need look no further than to the physical assets pledged as collateral by a debtor. They are liquid and quickly transferable.

The bottom line regarding business financing is perhaps that multiple funding vehicles are often available to borrowers that can be creatively structured and that provide for material flexibility.

A proven commercial law firm can provide further information concerning asset-based lending and other types of business funding.