Every small business owner knows the pain of a cash crunch. If you own your own business, then you know how easily you can come up low on cash flow. To make it more difficult on you, a small business is less likely to qualify for approval for a business loan. What you can do, however, is use your business assets as collateral. This is one of the best ways that you can take keep your business going, even in hard times.

Asset-Based Lending

If you’re unfamiliar with asset-based lending, it helps to understand it before you seek it out. This is a type of business financing that you guarantee with your company’s assets. Essentially all businesses have valuable assets. Whether you have computers, equipment or vehicles, there are a variety of different assets that you can use to receive financing. This type of lending allows a business owner to use these assets to secure a loan. Now, of course, it depends on the lender, but you may be able to use a variety of flexible assets. For instance, you can use your accounts receivable or inventory to receive financing. In general, you use these loans as a short-term option so that you can expand a business, pay off debts or cover any new expenses.

Advantages of Asset-Based Lending

Asset-based lending offers many advantages to small businesses. If you qualify for asset-based lending, you don’t need to worry about having a high credit rating. In traditional bank lending, your credit score is one of the most important factors that lenders look at. If you have an average or low score, you may not qualify for a traditional loan. Another advantage is that you still get to use your assets even when they are serving as collateral.

How Asset-Based Lending Is Different

One of the major differences between asset-based lending and traditional business loans is that with a traditional business loan, you raise cash from your account or guarantee with your own assets. With asset-based lending, however, you keep your personal finances separate from your business finances. You get to use your business assets.

When it comes to business financing, asset-based lending is a great option for those that don’t qualify for a traditional loan. In asset-based lending, you use your business assets as collateral. This helps you keep your business running when you’re low on cash flow without having to commit to a traditional bank loan.