For many businesses, asset-based loans can be the perfect solution when they’re short on working capital but don’t currently qualify for a traditional loan. The key is finding the right funding partner that is willing to learn about your business, understand your challenges, and then work with you to find the optimal solution that will offer the most benefits to your growing business.
Finding that right partner is a vital part of the funding process, especially when you rely on their expertise, products, services and connections. Nothing can roadblock a company’s operations like lack of working capital. With asset-based loans, in particular, you’ll be accessing larger amounts of capital while agreeing on terms that maximize the value of your available assets. Obviously, working with a trusted partner is crucial.
Background: Who should consider an asset-based loan?
Asset-based loans (ABL) allow companies to leverage their accounts receivable, inventory, and in some cases, equipment and real estate to access working capital. Qualifying companies generally have a strong credit rating and maintain comprehensive financial reporting with strong internal controls — tending to be established businesses with a solid track record.
With many funding options in the market, how can you tell which one is right for your business? Below are three main factors to consider.
1. Find a like-minded partner
Your ABL funding expert should feel like a genuine partner in your business. They’ll need to understand your business model, industry challenges, opportunities, and any unique processes you have in place. A partner with an entrepreneurial mindset and personal experience as a business owner/operator could also add to their understanding of where you’re coming from and where you are going.
Also, look for funding partners who have cut their own red tape and complicated approval processes. These can slow down your ability to access cash flow when it’s needed — but be careful to ensure they are still credible and still have a strong reputation in the market.
Ultimately, a like-minded partner will work with you in the long-term and should go the extra mile to create more availability against eligible collateral. That means your assets will provide the biggest return for working capital.
2. Look for value beyond the “money”
Your ABL partner should be more than just a person that writes you a check.
Factor in various aspects of value beyond the capital they provide. With ABL, rates are generally competitive but on par with different vendors, so it’s important to assess other criteria that can show who you’re dealing with.
Look for service partners who will provide access to their referral networks that can extend your business relationships. This longer-term value is often overlooked but can be a strategic benefit. A trusted partner will also provide access to advice related to the struggles of a growing business, and they’ll be able to offer strategic business advice and beneficial tools as you grow the company. Their network along with access to like-minded entrepreneurs are invaluable to a business facing the challenges of growth and emergence.
3. Work with a person, not just a piece of software
Technology is an important aspect of modern business, but when it comes to a funding relationship, you should be working with a real person.
In particular, find local representation and experts who will be responsive when you have questions or challenges. Look for an organization with strong underwriting, risk assessment and good relationships within the industry. Your partner should also be able to work with you to offer creative solutions to your business funding needs.
With ABL, your company is going to be relying on the funding partner for large amounts of working capital, and this shouldn’t be trusted to a piece of software or website touting fast-funding without strategic consultation.
Time is limited. I get that. You’d have to be a wizard with some kind of time-turning device to personally check all the boxes on an entrepreneur’s to-do list. And even if you could, why would you want to? This is a business, not a contest. Your objective should be to build the leanest, meanest, sustainable organization possible.
But cash is also limited, especially during the pre-launch phase, before you’ve issued and collected on your first invoice. What entrepreneurs need is a methodology for organizing to-dos, and for determining which are must dos, which should be outsourced, and which could be done at a later date, or not at all. My 4P method does that.
You may have heard of the Four “P”s of marketing: Product, Price, Place, and Promotion. Given my bias for action, my four Ps are verbs, not nouns, and represent a four-step process for successful outsourcing: Planning, Picking, Phasing In/Out, and Partnering.
Step 1 – Planning
In the first step we outline the basic structures you will need in your business for it to be functional. This is unique to every business, but there are some basic areas that are common to all – invoicing, selling, taxes, accounting, etc. Begin this “Planning” phase by listing all the bases that need to be covered in your business, for example:
- Industrial Design
- Product development
- Code writing
- Marketing communications
- Digital marketing
- Warehouse management
Your list will be unique for your company or industry. But you will know what to include because these are all things you’re going to have to deal with in YOUR business.
Step 2 – Picking
The next step is the fun one. Here you will put the above items in an EXCEL spreadsheet and “Pick” the jobs you want to do by putting your name next to them. You should base your decisions on the following criteria:
- What do you do best?
- What do you like to do?
- What do you not like to do?
- What could you pay someone else to do cheaper?
- And, what else could you do, in a pinch, if you had to?
I included the last one in recognition of the fact that resources are limited and you may need to do certain things you may not want to do in the best interest of your company, until you have enough cash coming in to hand off to someone else. Assign ownership to these tasks using three distinct labels:
Step 3 – Phasing in/out
Megatons of thrust are required for a rocket to break free of Earth’s atmosphere. But once the rocket is in orbit, the fuel tanks and similar dead weight are cast off so that the rocket can maneuver more nimbly. Similarly, there are processes required at the launch of a business that are no longer necessary once the business is up and running. The third “P” pertains to “Phasing” tasks in and out, and could also reasonably be called “Pruning.” For this step, add two more columns to your spreadsheet. Label the first column, “6 months,” and the second, “1 year.”
In these columns you will demarcate items you plan to bring in house, consolidate with other activities, or eliminate because they are no longer necessary. This is a discipline that even some of the world’s biggest companies struggle to master, but it critical if you want your business to remain competitive.
Step 4 – Partnering
The fourth and final P is Partnering. This is where you identify strategic third-party relationships that will add measurable value to your business by:
- Providing capabilities or services you would not otherwise be able to offer
- Filling a critical skills or talent gap
- Partnering with other small businesses to share the cost of non-core services and infrastructure
- Sharing office space, administrative personnel, Internet access, and IT infrastructure, with other businesses.
This is, by no means, a comprehensive list. Your list will reflect the needs and profile of your business.
By using the four Ps, you can plan to do only those things you like, you´re good at, and to which you add value within the realm of your company. You can identify processes you’d like to bring in-house, consolidate, or eliminate, and look for ways to share costs and resources with others through strategic and value-added partnerships. And you can outsource within the limitations of cash flow and budget.
If your holiday shopping list is making you nervous, especially when it comes to clients and colleagues, don’t worry. We’ve got you covered with gift ideas for even the most hard-to-impress business pros in your life.
Part of being an entrepreneur or SMB owner is an understanding that balancing work and life can be demanding. Even if your office closes for a few days, business doesn’t completely stop for the holidays. For many of us, it gets a lot busier. Here’s hoping that this handy gift guide makes your festive season flow a little smoother.
Here are our top picks from three of the best gift guides around. Click through further to see the full lists and peruse their expertly curated suggestions. Best of all, most of these items are available on Amazon with just a few clicks — perfect for those of us on a tight schedule.
The tech bloggers at Mashable really nail it with this list of essential items that will get used all year (as opposed to ending up in the garage after January). Take for example Smartwool Socks, an All Purpose Kitchen Knife, Rainbow Sharpies, a Fold Up Rain Jacket, and Noise Canceling Headphones. These make outstanding gifts for the kid in all of us.
Comprised of “things we’re hoping to receive this season,” the tech experts from popular gadget blog Gizmodo assembled an incomparable guide for all the electronically inclined folks on your list.
Highlights include Outdoor Research Stormtracker Heated Gloves for cold weather outdoor enthusiasts, the quintessential Audio-Technica LP120 Professional Turntable for those looking to get serious about collecting vinyl, and the face-rejuvenating Clarisonic Mia 2 Facial Sonic Cleansing System.
Legendary angel investor, author, social media guru and podcaster Tim Ferriss shares his list of fantastic gift ideas for fast-paced individuals like himself.
Tim’s recommendations are broken down into helpful categories of under $25, under $50, and under $100. Highlights for us include the RAD Roller, which is amazing for rolling out tight muscles in the back, arms, and legs. The Sleep Master Sleep Mask is great for anyone who sleeps on planes or on irregular schedules. And finally the multipurpose casual/athletic shorts Ferriss swears by Myles Everyday Shorts.
Bonus: Other notable gift guides
These include one from The Atlantic for the impossible-to-buy-for, which they crowd-sourced from real readers. Refinery 29 has another very fun interactive gift guide for Moms, Dads, significant others and even your ‘work spouse.’ Generate a custom selection of gifts based on traits like chill, type A, early adopter and fancy.
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