Law Office of Henry B. LaTorraca Civil Trial Attorney

Asset-based loans for small businesses

In California, almost every business will need access to funding in order to grow at some point. Fortunately, business owners can take one of several routes when looking for funds: They can sell some of their equity in return for a sizeable cash flow injection, or they can try to borrow the funds from a reputable lender, such as banks and wealthy investors.

When trying to borrow money, businesses are primarily influenced by their ease of access to credit, which is another way of gauging how willing institutions are to lend out cash. The good news is that access to credit has been increasing over the past few years, evidenced by a 9.3 percent increase for small companies over the past year alone. in addition, businesses are having more success securing asset-based loans, resulting in an increase of 7.2 percent of small businesses reporting that they have received asset-based loans over the past year and 16.6 percent of middle-market companies making the same claim.

It should come as no surprise that access to credit has been increasing over the past few years. To start with, the economy has been stable, especially when compared to how things were just a decade ago. Furthermore, companies have been reporting that their cash flows have been getting better, meaning that not only can companies be more confident about paying loans back, but they can also manage their working capital better, reducing their need for outside loans. Consequently, companies have been experiencing steady growth, which has caused about 90 percent of business owners surveyed to believe that their business will expand this year.

This thriving environment could entice any business owner to seek out a loan. Should that be the case, the business may benefit from the advice of a commercial real estate attorney to know how much a loan is going to cost them as well as what they stand to lose without the extra funding.

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