The recovery starts locally
Fortunately, options do exist for small businesses that are financially challenged. Asset-based lenders are an excellent temporary source of financing for businesses that are pre-bankable, non-bankable, working through a turnaround, or simply growing so fast that traditional financing does not work. These solutions typically include asset-based term loans, accounts receivable (A/R) financing, factoring and purchase order financing.
With bank underwriting guidelines getting tighter, asset-based lenders in many cases are the perfect solution to help plug financing gaps that many companies are experiencing right now. Manufacturers and distributors and B2B service companies are excellent candidates for ABL because financing can be based on their accounts receivable.
According to the most recent Asset-Based Lending Index, which is published quarterly by the Commercial Finance Association, total committed asset-based credit lines were up by 2 percent in the fourth quarter of 2012 compared to the previous quarter, and total credit commitments were 6.7 percent higher than a year earlier. “As we have maintained throughout the recession and credit crisis, asset-based lenders will continue to lead the way as a primary source of working and growth capital for U.S. businesses as the economy hopefully moves in a positive direction,” states the Commercial Finance Association’s Chief Operating Officer Brian Cove.
Finding the Right Asset-Based Lender
Your bank is a good place to start your search for an asset-based lender. ABL is a specialized type of financing that is not offered by all banks. If your bank does not offer ABL, it may be able to refer you to a commercial finance company. You should carefully investigate any finance company that you are considering working with. Meet personally with a local representative and determine the following:
- Are they a direct lender?
- How long have they been in business?
- How well capitalized they are?
Make sure you are comfortable with the representative and the asset-based lender, as they will likely become an integral part of your team.
Tom Klausen is the president of First Vancouver Financial Services, Ltd., and a consultant in the small business field. He works with small business owners, lenders, consultants and accountants throughout the U.S. and Canada. He has been involved in the alternative lending field for more 27 years and has written and published numerous articles on the topic of alternative finance. For more informatin, call (604) 988-1490 (in Canada) or (206) 947-0912 (in the U.S.) or visit http://www.fvf.ca.