Niche and mid-sized manufacturers often find themselves in need of extra financing – be it for equipment, employees, materials, or incrementally expanding the business. However, traditional bank loans are not always in the picture due to current credit ratings, prohibitively high requirements set by the banks themselves, or simply because manufacturers do not want to take on additional debt. As an alternative to bank loans, many mid-sized manufacturers are turning to asset based financing to get the extra working capital they need.
How Asset Based Financing Works
Asset based financing is a revolving line of credit structured around the value of those items owned by a manufacturing business. The assets can be (but are not limited to) property, equipment, and receivables. This line of credit can be drawn upon as needed, and replenished, giving manufacturers a reliable source of funding which is not designated for any specific purpose. This gives business owners a lot more flexibility than traditional loans, which are typically for specific uses.
Asset Based Financing Is Not A Loan
Because this type of financing is not considered a loan, there is no debt placed on the balance sheets. In many ways, asset based lending acts like a conventional business line of credit. The amount spent from the line of credit must be repaid with interest, but business owners can draw from that source as much and as frequently as they need, so long as the credit exists and payments are made.
Financing That Grows With Your Business
One of the great benefits of asset based financing is that, unlike bank loans, it is not single-instance funding. As your manufacturing business grows and the volume (and value) of our receivables increases, so does the spending limit on your asset based line of credit. It can be one of the more positive financing cycles, because this type of financing can greatly help manufacturers to grow successfully, and the line of credit grows with that success.
If you own a manufacturing company, and can benefit from asset based financing, or if you would like to explore other funding solutions that are tailored to your needs more than the “one size fits all” approach of traditional lenders, call Lavan Financial Group at 203-308-4547. We specialize in helping manufacturers of all sizes get the funding they need to meet their goals for immediate and long-term success.