How Asset-Based Financing Increases Cash Flow

Financing for working capital is a commonplace occurrence, but many new business owners assume that it is a tactic reserved for moves like equipment acquisition or financing the supplies and labor needed to take on a big order. Both of those use cases are very real, but financing your regular cash flow is also a way to keep your business flush with capital. Increased cash flow allows you to predict when you will have working capital more easily, and it provides you with options when customer payments would otherwise complicate your plans. Asset-based lending is often the best choice for cash flow financing for many good reasons.

Build Financing Around Your Company’s Strengths

When it comes to asset-based instruments, there are a lot of choices, and their viability depends on your business model. For example, a company that does only cash sales would not be able to take advantage of invoice financing, but it’s likely a merchant cash advance would work. Similarly, assets can be combined to provide even greater access to capital through a loan built around the pooled value of, say, inventory and invoices. A result is a form of financing that provides you with the cash needed to make payments, order supplies, and meet payroll even if your own revenue is delayed due to deposit clearance times or customer payment delays.

Asset Based Lending Can Sidestep Your Credit Report

There are some asset-based loan programs that will show up as regular loan debt on your credit score, but there are also options that will not. This is very beneficial because it means you can finance your business assets for cash flow without altering the likelihood of loan approval for a major undertaking like a real estate purchase. That provides you with a way to keep cash flowing to your vendors and suppliers even if your capital reserves are tied up in a down payment.

On the other side of the equation, being able to build a loan or credit line around your assets and get approval is also a great way to build credit. The result is that you can use this form of lending to buff up your credit score as needed or to leave it when it is in a good spot and you have loan applications out. The result is faster expansion, more sales, and more cash flowing through your company. If your processes work well, cash flow can even be expanded to the point where financing is only necessary for a pinch.