Asset-Based Loan Retail Manufacturer Secures Financing
Author: Valerie Mellema
Date posted: 01.06.23

For more than 50 years, an East coast manufacturer for the retail industry had made a name for itself, and profits had continued to soar. When COVID-19 hit, it was a challenge to keep things running smoothly but a lot of work made it possible. The owners were proud of all the hard work they put into the company and how well it had always done. However, sometimes good things come to an end.

Supply Chain Issues Hit

 

COVID wasn’t the end of challenges for this manufacturer. Things got extremely complicated when supply chain issues started to become more common. While competitors had closed on a temporary or permanent basis due to COVID, this company ran into an issue with business falling almost 50% while losses continued to be an issue.

 

While the business looked into additional traditional funding, it was denied. This is what made the owners put on their thinking caps to consider another way to move forward and succeed. They decided that a new product line based around personal protective equipment could be the perfect solution.

 

The Cost to Expand and Change

 

Before delving into potential financing options, it was essential to understand exactly how much money would be needed for the expansion. In the meantime, the company was doing okay picking up all the clients of competitors who had closed their doors. However, they knew this was a big change and it would require a substantial investment to get it right.

 

When all was said and done, it was determined that the manufacturer would need about $500,000 to move forward with its new product line. This was a big chunk of change but they held out hope that a solution would present itself.

 

What Financing Options Are Available?

 

With traditional bank loans still unavailable, it was time to dig into other options. Some of the options included a line of credit, merchant cash advance, SBA 7(a) loan, and asset-based loan. After getting details on each of these financing options, the owners went through them to determine which would be the best for their future needs.

 

It was easy to see that a loan with collateral would be a good choice since the business had facilities, equipment, and products. However, that still left them choosing between several options. In the end, the asset-based loan edged out other choices.

 

What Makes the Asset-Based Loan Special?

 

Asset-based loans are secured using company assets of a wide variety. It can include everything from accounts receivable to equipment and inventory. This business had all of those and felt it would be a great form of financing. It didn’t hurt that this would make interest rates lower at the same time.

 

These loans were available for the needed $500,000 as well as much more. The interest was low and had a term length of two to 10 years. This means the loan was affordable, flexible, and easy to keep up with based on monthly payments.

What Happened Next

 

Working with the new lender, the company was able to finance its new product line. The loan was based on inventory and receivables so there would be few restrictions in place. This made it possible for continual growth to be realized for the business.

 

Since getting the asset-based loan, the business has quickly caught back up and is making great profits. They’re happy about the financing they chose and would look to alternative forms of financing in the future. All in all, things are going great and the new product line has been a huge hit.

About The Author | Valerie Mellema

Valerie has over 16 years of experience as a professional writer of blogs, eBooks, articles and press releases, with a focus on finance and alternative lending. Valerie resides with her family in Texas and is passionate about her horses.

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