How to Leverage Asset-Based Loans for Growth and Expansion

ABL is secured funding, providing loans that are secured by specific assets. These assets can take several forms, tangible and intangible. Tangible ones could include equipment, inventory and real estate. Intangible assets could include accounts receivable, intellectual property and even brand names. Whereas other lending relies primarily on a company’s revenues, cash flow and overall financial performance, ABL relies on collateral – and the liquidation value of that collateral.

For companies with substantial assets – particularly inventory, equipment and/or accounts receivable – ABL can lead to a ready source of funding in all types of economic cycles.

Obtaining working capital funds is a mainstay of ABL. An injection of cash can help a business cover operating expenses, payroll and inventory purchases, and manage other day-to-day expenses. ABL can do more, though. It can provide the funds to pursue growth and expansion initiatives.

• Offers flexibility. ABL lenders generally do not restrict use of funds, so companies can put the money to work however they see fit. If their business is developing or changing, they can shift fund usage accordingly. ABL is also easily scalable, so companies can use it to more quickly take advantage of growth and opportunities they identify.
• Removes obstacles. ABL can provide gap funding, the cash needed to bridge gaps between outgoing cash (such as payments for equipment and inventory) and incoming revenues. Without concerns about covering gap funding, or day-to-day expenses, companies can maintain focus and continuous action on defined growth initiatives.
• Finances market expansion. Market expansion can take the form of developing new customer segments, adding geographical territories or locations, adding product lines or gaining market share in a host of ways. Available funds from ABL are ideal resources for expansion initiatives.
• Provides M&A capital. For some companies, ABL can provide the funds they need for well-timed acquisitions or mergers. The right acquisition, at the right time, can help a company grow quickly, gaining access to new markets, products, services and resources.

Diversifying and solidifying financial strategy

Businesses have often turned to ABL for working capital. Those with sizable assets – tangible or intangible – can also use asset-based loans for expansion and growth. In using their assets this way, they can adapt to market conditions faster, and create a more diversified, resilient financial strategy.

Mitsubishi HC Capital America develops innovative, customized financing solutions that help businesses throughout North America generate long-term growth and achieve sustainability goals. Our experts understand how to utilize ABL as a strong financial tool. For more information on how you can leverage ABL for growth and expansion, contact us.