Looking For An Alternative To A Small Business Loan? How To Get Financing Using Your Assets 

Sustaining a consistent cash flow is paramount for the continuous prosperity of small enterprises. However, in the current landscape of 2023, this stability has been hindered by the escalating cost-of-living challenge, resulting in steep cost increases for both households and businesses.

While there’s an anticipation of eventual price adjustments at some point, this resolution might not be imminent, implying that the persisting concerns of inflation and their subsequent impact on businesses could potentially extend well into the year 2024.

For small business leaders, this can be a challenge, especially if you’re looking to expand or have to deal with a sudden, unexpected expense. While you can raise your prices, this might lead to a loss of orders, so you might struggle to find ways to cover the rising costs and keep your business afloat.

One solution is to consider financing options tailored towards companies of a smaller size. Small business loans are the obvious option, but these can come at a significant cost and take a long time to apply for.

As such, you might want to consider alternative options when trying to bring more cash into your business. While you might not think that you have the tools at your disposal to deal with rising costs and get the financing you need, it might actually be simpler than you think. Using the assets your business already has, you could get access to a wide range of different financing solutions.

Keep reading, and we’ll share some solutions that can help you to use your business’s existing assets to get financial assistance, even during these tough times.

Invoice Financing 

If your business has outstanding invoices from customers, you can use invoice financing to get money quickly. With invoice financing, a lender advances you a percentage of the invoice amount, and you repay the lender when your customer pays the invoice. You could also try selling your invoices to a third party at a discount, meaning they assume the responsibility of collecting payment from your customers, and you get immediate cash. This approach is particularly valuable for businesses with long periods between delivery and payment.

Asset Financing 

Buying new equipment for your business can be expensive, but it is possible to use the equipment itself as collateral. The lender will provide you with a loan specifically for the equipment, and if you fail to repay, they can repossess the equipment. If you’re considering using asset finance solutions for your small business, then check out experienced brokers like Portman. They can help you to find the perfect asset finance solution to suit your unique needs to ensure that you make an informed decision that benefits your company in the long run. By using asset financing, you can spread the cost of your new business equipment, allowing you to grow your business and make the most of cutting-edge machinery and new tech.

Real Estate Equity 

Businesses that own properties have the potential to make the most of their real estate assets by securing a second mortgage on the property or utilising it as collateral for a line of credit. Commercial mortgages are commonly used for the acquisition or refinancing of properties intended for business purposes, such as office buildings, retail spaces, and industrial facilities. While commercial mortgages can provide a substantial amount of financing in a short period of time, it is important to note that they may have distinct terms and requirements in comparison to residential mortgages. Interest rates may be higher, and loan terms can vary significantly based on factors such as the property type, location, loan amount, and the financial standing of the business. Engaging the services of a knowledgeable commercial mortgage broker or financial advisor can assist in navigating the intricacies of obtaining a commercial mortgage and ensure that an informed decision is made for the benefit of the business.

Inventory Loans

Similar to asset-based lending or a mortgage, you can use your inventory as collateral for a loan instead of your property or equipment. Lenders will evaluate the value of your inventory and provide financing based on a certain percentage of that value. With many businesses overstocked to the tune of an average of £102,000, inventory loans could be an ideal way to make the most of these items and ensure that you keep money flowing into your company to deal with any unexpected expenses you might face moving forward.

A Quick Conclusion 

Making the most of your business’s existing assets presents a promising avenue for exploring alternative financing options. However, it’s essential to prepare for potential outcomes proactively. As is the case with any financing arrangement, there is inherent risk involved. In the event that your business is unable to meet its loan obligations, there’s a possibility of forfeiting the assets pledged as collateral. Prior to embarking on any of these avenues, it’s prudent to meticulously evaluate your business’s financial standing, the intricacies of the financing terms, and the potential risks at play. Seeking guidance from a financial expert or a business consultant can empower you to make well-informed decisions tailored to your unique circumstances. By taking these steps, you can effectively leverage your business’s existing or future assets, paving the way for innovative approaches to fund growth and ensure future success.