It’s a rare business that experiences success without borrowing money at one time or another. The trick with growing your company is dealing with the excessive costs of growth without yet reaping the financial benefits. Taking out loans comes with the territory, and asset based lending seems to be the preference of many growing companies. With working capital a constant concern and growth capital already tied up, these fast-acting loans can be the best option for a company on the rise.

There are several differences between asset-reliant lending practices and standard bank loans. First and foremost are the requisite assets. It’s possible to get a bank loan with nothing more than an ID and a credit statement if that’s your fancy, though the terms might not be ideal. With asset based lending, the borrower has to put up some form of a guarantee beyond the promise of repaying the money. This is part of what makes these loans popular with young businesses; while they may not yet have deep pockets, they have their receivables and merchandise to offer as collateral.

Collateral provides the incentive for the lending company while guarding the small business taking out the loan from long-term payments and endless interest hikes. More importantly, the repayment guarantee, in the form of future earnings or physical equipment, allows the lender to release the funds more quickly. Therein lies the core of asset based lending and why it’s popular amongst businesses looking to expand. Companies can’t well predict when and how they’ll grow, so a quick influx of cash might be needed ASAP to increase inventory or upgrade a facility. Waiting for a bank to process a standard loan won’t work in that situation, whereas a short-term, readily funded loan can make all the difference.

The truncated repayment period can also be beneficial for a small business owner, assuming they’ve planned for quick repayment. The longer the terms of a loan, the more potential there is for racking up interest and falling behind on monthly payments. When you borrow money to fulfill a specific need that will in turn net you additional profit, the issue of extended repayment is moot. With the right approach, these loans can fit right in with your existing business plan.

For companies that can provide collateral and are poised for growth, asset based lending is often the quickest and easiest way to fund expansion. With proper planning, these loans can help small businesses expand without the added baggage of high interest rates and long-term payments.