Asset Based Lending
As well as their accounts receivables, many businesses have a considerable amount of capital tied up in physical assets, such as inventory, plant & machinery and real property. With asset based lending, we liberate the cash held within these assets, thereby giving you fast access to substantial sums of working capital.
Who is asset based lending for?
It's designed for businesses, with an annual turnover in excess of £10million whose balance sheets contain current assets, but who may not have access to ready reserves of cash. Manufacturers and distributors, for example, often have to invest in materials, inventory or technology months before payment is made. During that time, cash flow may be restricted. Asset Based Lending enables you to borrow against value of your assets - using your trade receivables and inventory - to finance the working capital you need. What's more, as your assets grow - in such things as receivables and inventory - you can increase your funding line appropriately, subject to credit approval. When turnover exceeds £25 million, we can look to financing your fixed assets alongside your working capital ones as part of our corporate Asset Based Lending offering.
How does it work?
Your initial funding line is set up to accommodate the highest required funding
peak in your 12 month forecast. That means you operate with headroom that's
appropriate - having access to more working capital when you need it without having to slow your business growth or raise equity. And while the facility is there for you, if you don't need it, you don't have to draw from it.
Why asset based lending could work for you
By creating an additional pool of liquidity for your business, Asset Based Lending can enable you to take advantage of opportunities you may not have been able to
finance in the past from the simplest ideas to quite complex ones For example, it can:
1. Manage your day-to-day working capital
Economic recovery can present unexpected
risks as cash flow is hit by the gap between
outlay and payment. By freeing up the
additional value in your business,
Asset Based Lending can provide a valuable
capital cushion, and offer you greater control
over your cash conversion cycle.
In addition, Asset Based
Lending's weekly inventory monitoring
and reconciliation opens the way to leaner
purchasing and swifter, more accurate
replenishment - helping you to run a more
agile business, with less unused inventory
dragging on the balance sheet.
2. Enable growth
By freeing up the additional value in your
business, Asset Based Lending
can provide the working capital to keep the
day-to-day business strong, while you invest
in the increased capacity to take on new
orders as the economy returns to growth.
3. Support cash flow through seasonal
or market fluctuations
Seasonal industries and those in fluctuating
markets can present cash flow challenges.
Manufacturing, distribution, wholesale - all
experience extreme seasonal fluctuation
in orders and payment. Yet businesses in
those sectors still have to run plant, upgrade
technology and collateral, and invest in raw
materials and inventory all year round. Unlike
traditional loans, Asset Based
Lending's flexible repayment schedule brings
stability to this cycle.
4. Make fast buying decisions -
allowing you to purchase materials
quickly when the price is right
The ability to take swift action when buying
could give you not only the freedom to take
advantage of deals decisively but the ability
to negotiate discounts on the basis of early
payment too. Asset Based
Lending brings forward the entire credit cycle
for your business, so you could always have
the cash you need.
Businesses may also use the agile purchasing
power offered by Asset Based
Lending to help mitigate variations in the price
of things like raw materials, fuel and services.
5. Business Restructuring
Market and economic volatility are key factors that can affect many businesses, no matter what your size - presenting challenges for some and opportunities for growth to others. Whatever your position in the market it is important to review regularly your business plan and financial arrangements to ensure they are working effectively.
Asset Based Lending (ABL) can offer a more flexible alternative to providing liquidity and funding against the assets within your business and can be used to refinance traditional forms of bank finance which can be seen as a more covenant restrictive facility. The 'evergreen' credit facility that ABL offers gives a business the greatest amount of flexibility & borrowing capacity from its existing asset base and added to this the facility is designed to grow as the company grows.
As part of the RBS Group, RBS Invoice Finance can also structure an ABL line as part of an overall financial package. This means we can deliver a joined-up partnership approach which can be helpful when reviewing your refinance options.
Security may be required. Product fees may apply.