The old adage of ‘cash is king’ has never been more relevant than in the current downturn where businesses need to redouble their focus on strengthening liquidity in order to consolidate trading positions.
Companies looking to mitigate future risk or even gain a competitive advantage are looking for funding packages which boost cash flow and provide quick access to working capital.
In this climate Asset Based Lending (ABL) has come to the fore due to the flexibility it offers businesses of all sizes, from SMEs to multinationals.
It is a strategic and flexible tool which can quickly inject funds into a business and provide ongoing working capital by drawing on the value of existing assets such as a firm’s receivables, stock, unencumbered plant and machinery and property.
Over recent years it has also established itself as an integral part of the funding landscape for buyouts, acquisitions and refinancing of all sizes and across all sectors.
ABL allows management to finance a transaction by unlocking often considerable ‘hidden’ value in a firm’s balance sheet and it can sit comfortably alongside debt and equity in a refinancing structure.
It is therefore increasingly being viewed as an ideal way to bridge any funding gaps, secure additional working capital and ensure robust transactions come to fruition.
In a challenging economic environment, the ability to closely manage and control capital is a necessity and ABL is a proven tool to ensuring positive cash flows during these testing times.
Nick Robson, Regional Director, Large & Major Corporates, Lloyds TSB Commercial Finance.
February 2009