Server farms, land moving equipment, CNC machines, land, building and industrial equipment are all high value assets with significant longevity that can be leveraged a number of ways to free up cash to do business. When you need to expand your fleet to meet new demand or you want to acquire the building you currently rent, asset based lending can be the path to greater management of your business resources.
Anchor Business Funding has helped many businesses access a portion of the value of your assets up front, to use toward a down payment, to pay off higher interest loan debt or otherwise manage your assets better.
Asset Based Financing is one of the ways small businesses and newly launched ventures gain the resources they need to expand and grow.
Inventory
Many businesses think that asset classes have to be fixed such as buildings, machinery or equipment, but today that is not the case. Stock on hand can be an asset that you borrow against. Most retailers maintain a standard stock value in each retail location. When it’s time to bring in a new season, leveraging stock on hand to buy with cash and gain the lowest cost goods makes smart business sense.
Manufacturers can likewise borrow against raw materials or manufactured goods. What determines your eligibility is the market value of your materials or goods, and your cash flow history.
Your loan will be based, not on the purchase price you paid, for goods, but their value at market. This helps increase your access to cash, but it also pits repayment against future earnings. For many businesses it is also a great way to manage through slow seasons for industries that make their money in one part of the year.
Commercial Real Estate
Tap into commercial real estate equity through a number of lending options. Many businesses that own property have a significant portion of their assets tied up in property value, but real estate asset based borrowing can be a game changer. From lines of credit to bridge loans, you can draw on equity to empower additional revenue generating activities.
For real estate businesses, leveraging an existing property to buy a new property allows you to expand your CRE holdings, or to move from an old property to a new one, while acting at the speed of business. Traditional loans can take up to 45 days to close, but bridge loans can be authorized in just a few days. That means you can get into your new property and start renting or doing business with a much shorter time span.
Small businesses buying a building for primarily “owner operated” activities can access funds through the Small Business Administration. To be eligible, you must utilize 51% of the facility. You are able to rent 49% or less of the building to other businesses, and the renter’s payments help offset the cost of the mortgage and upkeep.
Accounts Receivable
Accelerate cash flow with loans against accounts receivable. In the B to B sector, it’s not uncommon to grant 30, 60 or 90-day repayment plans, and if your client is fine paying some interest, it can be even longer before you see cash on hand return to normal. Borrowing against accounts receivable or invoices gives you access to cash earlier to keep business moving.
You’ll receive a lump sum of up to 80% of the invoice’s value. Then, after your client fulfills their terms, you’ll receive the rest, minus the lender’s fee. These funds can be used for any regular business operating expenses, and even better, do not require a credit check of your business. Your client’s repayment history and credit are of more importance in these circumstances.
This approach gives you early access to cash. For businesses that earn more through a bump in their turnover ratio, this can be a valuable proposition.
Equipment
From Doctor’s offices to construction and on to computing heavy industries, access to the latest equipment is at the heart of many businesses’ success, but being known for the latest technology and paying for it are two different matters altogether. A number of equipment financing options are available to keep you moving forward.
To purchase new equipment, start with an equipment loan. The equipment itself is the asset borrowed against. As you pay, you gain equity in the asset. Over time you’ll depreciate the equipment which will benefit your taxable income.
For those businesses that own aging equipment that has already been depreciated, a lease buyback can give you a fresh infusion of cash. You sell your equipment to a leasing company that simultaneously leases the equipment to you. They become responsible for maintenance and upkeep, and you pay lower monthly fees than you would on new equipment. Use the funds to upgrade your technology, or invest it in other lucrative opportunities while maintaining access to the equipment you know and love.
Should you choose to upgrade, this arrangement allows you some transition time as you continue to use your existing equipment and train your team on the upgraded system.
Hard Money
When your businesses make deals that need a fast turnaround, hard money may be the way to go. These loans can close in a few days, and require interest only payments during the term of the loan. To close out the loan, you’ll make a balloon payment to pay the balance as one large lump sum.
These are excellent loans for businesses that make large PO deals on a semi-regular basis. When a buyer comes to you with an ask larger than your common purchase volume, consider a hard money loan. This option can give small to medium sized businesses the purchasing power of the big players, and can allow you to make career changing deals.
Building owners that want to get into a new property quickly, either to expand their CRE holdings or to shift from an outdated building to something that meets their current needs can use bridge loans to create a seamless transition. Borrow against your existing property and make interest only payments while you close the deal and set up permanent financing on your new property.
Alternative funding allows these loans to close in just a few days, in comparison to SBA or bank loans that can take up to 45 days to close. When you need to move at the speed of business, hard money can provide the way.
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Your business needs the right funding to advance. Work with Anchor Business Funding to identify and source the right funds at the right price to keep your business moving forward.
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