3 Smart Ways to Use Asset-Based Loans for Your Business

3 Smart Ways to Use Asset-Based Loans for Your Business

We have all heard the cliche phrase, “You have to spend money to make money”. Unfortunately, if you’ve ever started a new business, you know that it’s true. While the goal of all businesses is to eventually bring in a steady flow of income, in the beginning, business owners often put in much more than they take out. A business loan can help cover these costs early on, before the company begins to turn a profit.

But without the income, how do you convince the bank to give you a loan? This is where an asset-based loan, also called an asset depletion loan, can come in handy. This type of loan is perfect for newer business owners trying to grow their business because it allows you to leverage your assets as collateral for the loan. In simpler terms, you can use what you already have to get the funds that you need for your business. Here are some smart ways to use that money to make your business profitable.

Buy equipment

Some of the largest up-front business costs are for larger pieces of equipment. Without the necessary equipment, however, your business won’t function. For example, say you run a lawn care business. You might have a great potential client base and excellent name recognition, but for the business to be successful you need to have lawn mowers. There’s no way around it. This is why it is a smart move to use your asset-based loan to cover high-quality equipment. It may be tempting to cut costs here and buy lower quality goods, but realistically, this will hurt you in the long-run. By providing yourself with the best equipment to do the job well, you will set your business up for success.

Make a prototype

If your business hopes to make a product, most of your income will come from the margin of profit on the sale of whatever good you make. But without a product to show investors or potential clients, it can be difficult to convince them to invest or buy. Using a small asset depletion loan can solve this problem by allowing you to make a prototype of your product. This can allow you to demonstrate in a more tangible way what exactly consumers are paying for.

marketing strategy to the next level

Take your marketing strategy to the next level

While you may have made a name for your business in your local market, to be truly successful you will have to expand the reach of your business. Of course, the easiest way to expand your client base is through harnessing the power of the internet. To do this, the first thing you need is a great website design, which looks professional and is user friendly. After you have the website, you still need to drive traffic to your page which can be done through paid advertising and search engine optimization. Unless you happen to be a talented web designer or a SEO specialist, you will have to hire a contractor or two, which can be pricey. Using your funds from your asset-based loan will help you to bring in the best possible people to craft and drive your marketing strategy, which will be absolutely worth it when the money begins to pour in.


While it may seem counter-intuitive, entrepreneurs should not be afraid to take out loans to get their business started. It is not an uncommon practice to jump-start your success with an asset-based loan to help you cover the costs you incur up front. Getting started is the biggest hurdle. Using a loan in the above three ways (or however you need to) can help you surmount that challenge and become the owner of a successful business.

Written by Casim Khalid

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