Many businesses in the UK struggle with tedious bank procedures to get a loan. The waiting times, credit score checks, and strict approval criteria make traditional bank financing challenging to access. If you are running a business and looking for a new way for finance, asset based lending (ABL) could be the right mix of flexibility and efficiency.
As UK businesses seek to obtain working capital, they need to be able to use their existing assets, which can include inventory, accounts receivable or equipment, as collateral. Businesses that require cash need fast access to immediate funds, but do not want to accumulate additional unsecured debt.
Our guide will explain how asset based lending works, its benefits, and how to obtain financing to grow your business in the UK.
An Overview of Asset-Based Lending ABL in the UK
What is Asset-Based Lending?
This is a type of lending that allows a company to obtain financing while securing a loan against the company’s assets. The assets can be tangible, such as property and machinery, or intangible like inventories, receivables, and even goodwill. The assets can be:
✔ Accounts Receivable (Invoices) – Money owed for goods or services which the clients have already been invoiced for.
✔ Inventory – Stock on hand, or materials that should, in due course, be turned into cash.
✔ Machinery & Equipment – Tools and technology that are essential to the business.
✔ Property & Real Estate – Business premise that can be used as security.
How Does Asset-Based Lending Work?
- You apply for ABL using your business assets as collateral.
- The lender evaluates your assets and decides the amount they are willing to lend you.
- You are paid a percentage of the value of assets you pre-agreed to offer, usually 70% to 90% for receivables and 50% to 80% for inventories or equipment.
- After servicing a loan, you can reclaim all the assets that were put up as collateral.
Example: A wholesale business in the UK can take out a loan using unpaid invoices as collateral to obtain the necessary working capital to purchase additional stock while awaiting payment from customers.
Are you in search of reliable asset-based lending solutions in the UK? Simply Factoring Brokers help businesses find trustworthy lenders who can provide the necessary financing.
The Advantages of Asset-Based Lending for Businesses in the UK
ABL has several key advantages which makes it a preferred financing option for companies across a range of industries.
- Obtaining Immediate Cash Flow
✔ Access to funding without waiting for invoices to be paid.
✔ Easier and quicker to obtain than a traditional bank loan.
- Flexible Financing According to Business Growth
✔ Increases with business growth.
✔ Great for businesses that are seasonal and require an influx of capital during specific periods.
- Retained Ownership of Business
✔ Unlike equity financing, ABL does not force you to surrender parts of your company.
✔ It allows you to fund your operations while maintaining control of your business.
Use case: A UK manufacturing firm can obtain ABL to purchase new equipment which eliminates the need for long-term loans or dilution of ownership.
How to Qualify for Asset-Based Lending in the UK
- Identify Eligible Business Assets
✔ Consider all assets that may be used as collateral such as invoices, inventory, and equipment.
✔ Ensure the assets you possess are valuable and operational.
- Maintain Up-to-Date Business Financials
✔ Prepare for a business check on accounts, balance sheets, and cash flow statements.
✔ Maintain proper financial records to ensure expedite transactions.
- Search for An Asset Based Lender
✔ Check lenders using interest rates, funding speed, and loan terms as filters.
✔ For more financing options, consult a specialist broker such as Simply Factoring Brokers.
- Submit Your Application
✔ Gather relevant documents, for example:
- Financial statements
- Valuation reports of Assets
- Business registration certificates
✔ The lender evaluates and approves the loan amount, and the necessary documentation is submitted.
If a business possesses strong assets, ABL approval may be given quicker than other loans, in some instances days.
Want hassle-free asset-based lending in the UK? Simply Factoring Brokers takes the stress away for companies looking for the most fitting ABL solutions.
Evaluating Asset-Based Lending in Relation to Other Financing Alternatives
It is wise to evaluate other business financing options before settling for asset-based lending.
| Funding Option | Advantages | Disadvantages |
| Asset-Based Lending | Flexible, quick cash, less stringent credit requirements | Valuable assets needed as collateral |
| Bank Loans | Lower interest rates, predictable repayment terms | Slow funding process, rigorous approval steps |
| Invoice Factoring | Speedy funding by using unpaid invoices | High fees, reduced control over invoice management |
| Equity Financing | Potential for significant investments, no debt repayment | An obligation of some business ownership |
Example: A UK-based logistics company with valuable trucks and equipment may prefer ABL over bank loans to access cash quickly into their hands without the tedious requirements that come with a credit score.
Tips for Effective Management of Asset-Based Loans
To take full advantage of asset-based financing, it is pivotal to manage them properly after securing the funds.
✔ Allocate Funds Correctly – Spend strategically on areas of growth like hiring, inventory, or upgrading equipment.
✔ Stay Ahead on Payments – Timely payment management is crucial for important loans.
✔ Adjust as Necessary – Reassess the position of your business regularly in relation to ABL.
✔ Document Claims – Keep detailed records of all the assets that can serve as collateral.
Pro Tip: A steady cash flow and operational flexibility may be achieved by combining asset-based lending with invoice factoring.
Final Thoughts: Does Asset-based Lending Fit Into Your Business Strategy?
For those businesses in the UK trying to maximize their cash flow using available assets, asset based lending uk offers a reasonable, strategic, and easy-to-access financing option. If your business:
✔ Requires immediate access to funds and has low credit rating restrictions
✔ Has Valuable assets such as invoices, inventory, or equipment
✔ Requires a more sensitive, adaptable, and scalable financing arrangement
… then you may want to consider asset-based lending.
Want to secure asset-based lending for your business?
Simply Factoring Brokers assist UK businesses to find the best ABL solutions through expert guidance and enabling access to reliable lenders.