Asset-based lending vs business loans: Which is best for business?

• Cash flow challenge: Businesses often needing access to capital to fund growth, equipment purchases, or working capital but choosing the right finance option can make a big difference to long-term stability.

   

• Perfect for: Business owners comparing lending options to fund expansion, manage cash flow, or invest in new opportunities while maintaining control over their finances.

Novuna helps businesses access the right funding from asset-based lending to business loans with tailored facilities designed around your goals. Whether you need scalable finance backed by your assets or a flexible loan for immediate costs, our experts can help you find a great fit for you situation.

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Understanding the difference

Both asset-based lending (ABL) and business loans provide businesses with vital access to funding, but they work in very different ways.

Asset-based lending uses the assets within your business such as machinery, stock, property, or receivables as security for a loan or revolving credit facility. It’s designed for companies that need ongoing access to working capital and want to leverage the value of their existing assets.

Business loans, on the other hand, provide a one-off lump sum that’s repaid over a fixed term, typically through regular monthly instalments. These are ideal for businesses needing fast, unsecured capital for a specific purpose such as equipment purchases, marketing, or expansion.

In essence:

• ABL focuses on long-term, scalable liquidity.
• Business loans focus on speed, simplicity, and fixed repayment clarity.

When to use asset-based lending

Asset-based lending is best suited to businesses that:

• Have valuable assets, such as machinery, property, or invoices.
• Need a funding line that grows in line with turnover or inventory.
• Manage large contracts or long-term projects.
• Want to release capital tied up in assets to fund expansion or acquisitions.

For example, an engineering firm might use ABL to unlock cash from machinery or receivables to fund new contracts and operational costs.

When to use a business loan

A business loan is more suitable for companies that:

Typical use cases include:

• Need quick access to funds for a specific purchase or investment.
• Prefer predictable monthly repayments and fixed terms.
• Don’t have sufficient assets to use as collateral.
• Want to maintain full ownership of their assets while borrowing.

For example, a consultancy might use a business loan to invest in new software or hire additional staff during a growth phase.

Choosing the right funding solution

If your business owns assets and needs a scalable funding facility, asset-based lending provides flexibility and typically lower interest rates.

If your priority is speed and simplicity, a business loan offers straightforward access to capital without asset security.

Many businesses use a combination of both for example:

• Using asset-based lending to fund large projects or acquisitions.
• Pairing it with a working capital loan to cover short-term operational costs.

This blended approach gives you long-term stability and short-term flexibility.

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Advantages of asset-based lending

Many printing and publishing firms combine invoice finance with other forms of funding to strengthen their cash flow position:

• Scalable funding: Facilities increase as your asset base grows.
• Lower cost of capital: Secured lending usually attracts better rates.
• Supports growth: Ideal for acquisitions, MBOs, or large contracts.
• Improves liquidity: Converts assets into working capital.
• Flexible structure: Funding can be drawn and repaid as needed.

Advantages of business loans

• Fast and simple: Quick application and approval process.
• Predictable repayments: Fixed monthly instalments for easier budgeting.
• Unsecured options: No need to use company assets as collateral.
• Broad eligibility: Suitable for most business types and sizes.
• Goal-specific: Fund one-off purchases, projects, or investments.

Related finance solutions

Many businesses use these funding types alongside other financial products:

• Asset-based lending: Release capital from your balance sheet.
• Business loans: Access fast, flexible capital.
• Working capital loans: Bridge short-term cash flow gaps.
• Invoice finance: Unlock funds from unpaid invoices.

These solutions can work together to build a flexible, resilient finance strategy for your business.

How Novuna Business Cash Flow can help

Our experts take the time to understand your goals and guide you to the most suitable finance solution if you're deciding between asset based lending or requiring a business loan.

Speak to our experts today and get a great fit for your situation.