What Are the Advantages of Asset-Based Lending?

Many businesses are aware of the risks of asset-based lending and other types of loans. It’s good to know what you’re getting into and take steps to keep costs down and avoid debt. That said, it’s possible to focus too much on the downsides and ignore the huge potential that ABL financing offers.

In reality, the pros and cons of ABL financing are pretty similar to other types of flexible financing, such as business credit cards and lines of credit. You shouldn’t sign on the dotted line blindly, but you also shouldn’t close your eyes to the notable benefits of ABL programs.

Greater Flexibility for Using Funds

Traditional loans come with an endless list of requirements from the get-go, including strict credit score requirements. Among the most frustrating are the restrictions on using the money. For example, most banks won’t let you use loan capital for remodeling, only property purchases. The building you’re interested in also has to check countless boxes.

With asset-based lending, you’re in full control of the money. You can use the capital to buy the property you want. You can utilize part of the funds to take care of needed improvements. And if you come across problems during renovations? You have the freedom to divert additional funds toward overcoming those obstacles, no questions asked.

Wider Range of Purchase Possibilities

The ways you use ABL financing are also broader. In a way, these loans are similar to working capital loans, but without all of the credit requirements. You can use working capital in countless ways, including payroll, equipment purchases, computer systems, specialized software, tools, new employees, emergency needs, business expansion, interior decorating and other goals.

Simpler Application Approval

Not all businesses have stellar credit scores or perfect cash flow. Normal loans are strict on both of those points, even if the company is run by a talented entrepreneur that generates tons of revenue. Those companies would have to make do without financing.

Fortunately, asset-based lending bypasses conventional requirements by looking at the value of collateral instead of the applicant’s financial history. Companies can use ABL financing to improve cash flow and finance smart opportunities, growing profits instead of staying in the same place financially.

Better Terms for Small Businesses

For many small businesses, traditional loans are like a straight jacket. They lock you into high monthly payments without flexibility. ABL financing can be far more flexible in terms of repayment schedules, seasonal fluctuations and market changes. For many businesses, this is an incredible solution.


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