Asset Based Loans for Small Businesses

Many small businesses these days have realized that a traditional bank loan is hardly the best option to get the financing they need. Today, you can’t just go to your local bank and apply for a loan unless you have a well-established company with a great credit history. If you’re a startup business, you’re likely to be rejected when you apply for a traditional loan. That means you have to be a little more creative in securing your finances. Non-traditional ways of raising money are now becoming much more common, including peer to peer loans, nonbank loans, cash advances, and leasebacks.

Asset based loans for small businesses are also becoming more popular. Even when mortgages (which are a type of asset based loan) aren’t considered, by 2008 asset based loans increased to $600 billion, and today that figure is even higher. In 2013 alone, more than $20.5 billion in asset-based loans were written in the US. Companies which made use of this method of securing finance include the tech giant Dell, the beauty product company Revlon, and the retailer titan J.C. Penney.

Who are Offering Asset-based Loans?

There are many institutions offering asset-based loans and they include banks and other financial companies. Now even hedge funds are offering these types of loans.

Who Can Qualify for Asset-based Loans?

According to the Commercial Finance Association (the US asset-based lending and factoring trade association), asset based lending has been used by a wide range of industries. Manufacturers are number one in the total market with 31%, followed by wholesalers (28%) and retailers (17%).

In general, lenders who offer asset based loans tend to approve the loan applications of businesses whose assets can be turned into cash right away if the situation demands it. These companies include retailers, restaurants, and other businesses that commonly take credit-card payments. Some asset based loan providers are also willing to advance cash with heavy equipment (usually used in farming and in manufacturing), real estate, and even patents as collateral.

The Terms of Asset-based Loans

The lending rates for these types of loans are generally lower than the interest rates charged by most credit cards companies. However, the rates may be higher than those found on traditional bank loans. What asset based loan providers look for are assets such as invoices, which are easier to convert into cash. The easier it is to turn an asset put up as collateral into cash, the lower the interest rate charged. For account receivables, lenders may front up to 80% to 90% of the value, while they may only grant capital of up to 50% or 60% of the value of hard assets like real estate or equipment.

Advantages of Asset-based Loans

These loans are becoming much more popular because they offer unique advantages for small businesses. These include a higher chance of approval and a speedier process for obtaining the loan. An asset-based loan is also great for companies with poor credit rating, since the quality of the asset used as collateral is much more important. Some lenders may also offer extra services such as credit reviews for customers, as well as payment processing and collection.

For many businesses, getting asset based loans means putting their future revenue on the line so that they can get the money they need to operate and grow. It’s generally a good deal for companies especially those who are just starting out. 

 

The Advantages of Asset Based Lending for Inventory and Accounts Receivable

 We serve growing lower to middle market companies typically with revenues between $8 million-$100 million+. We deliver timely results which our clients demand so they can achieve growth and higher profitability. Credit lines are typically $1 million – $50 million+. Call us today for a free consultation

Asset based lending for inventory and accounts receivable is one of the best business solutions today although admittedly, it hasn’t quite gained the popularity it deserves. Securing capital is always among the biggest challenges in running a business, and this is true even from the onset. To establish a business and bring an idea into fruition, you need enough capital. But to keep it running is another story altogether, and you will need working capital to make it even remotely possible. The reality is that some businesses have a problem finding firms that will lend them the money needed to cover incidental and seasonal expenses, especially when you need to expand. Fortunately, you can turn to asset-based lending for additional funding.

 

Understanding Asset-based Lending

Some companies think that banks are the only ones that they can turn to when working capital is scarce, but nothing can be farther from the truth. Traditional funding sources like banks tend to be very limiting and this is why asset-based lending is so much better as an option.

 

What happens with asset-based lending is basically as a company, you use your current assets as collateral when you apply for a loan. For instance, a lender could look at your inventory and offer you a financing option based on how much your asset is worth. Another thing lenders can take a look at is your accounts receivable; ‘buying’ it from you by converting it into cash and actually taking care of collecting it from your customers when it’s due.

 

Maximizing Assets for Liquidity

What asset based lending for inventory and accounts receivable can give you is the ability to maximize your assets for liquidity. Having assets like inventory and accounts receivable is important to any business, but if you need to be as liquid as possible, these assets won’t count for much. This is because of the fact that they’re just sitting there with value that you can’t convert to cash right away. Accounts receivable for instance is an asset, but you won’t get to ‘spend’ it in the same way you spend cash, until your clients pay you, which will depend on your agreement. That could be next week, next month, or next year. If you need liquidity to spend for other important things now, then turning to asset-based lending is the perfect solution.

 

Proving Credit-Worthiness

Another advantage that you can get with asset based lending for inventory and accounts receivable as opposed to traditional financing options is that you don’t have to work so hard to prove your credit-worthiness. In fact, for options like accounts receivable financing, it’s the credit-worthiness and credibility of your customers that proves to be more important, because in the end, the lender will collect from them, not from you.

 

If you are interested in asset-based lending, please check out www.neebocapital.com. Neebo Capital has financial solutions that will help your business get the funding it needs for day to day operations as well as aid in its growth.

The Advantages of Asset Based Lending for Inventory and Accounts Receivable

 

 

Asset based lending for inventory and accounts receivable is one of the best business solutions today although admittedly, it hasn’t quite gained the popularity it deserves. Securing capital is always among the biggest challenges in running a business, and this is true even from the onset. To establish a business and bring an idea into fruition, you need enough capital. But to keep it running is another story altogether, and you will need working capital to make it even remotely possible. The reality is that some businesses have a problem finding firms that will lend them the money needed to cover incidental and seasonal expenses, especially when you need to expand. Fortunately, you can turn to asset-based lending for additional funding.

 

Understanding Asset-based Lending

 

Some companies think that banks are the only ones that they can turn to when working capital is scarce, but nothing can be farther from the truth. Traditional funding sources like banks tend to be very limiting and this is why asset-based lending is so much better as an option.

 

What happens with asset-based lending is basically as a company, you use your current assets as collateral when you apply for a loan. For instance, a lender could look at your inventory and offer you a financing option based on how much your asset is worth. Another thing lenders can take a look at is your accounts receivable; ‘buying’ it from you by converting it into cash and actually taking care of collecting it from your customers when it’s due.

 

Maximizing Assets for Liquidity

 

What asset based lending for inventory and accounts receivable can give you is the ability to maximize your assets for liquidity. Having assets like inventory and accounts receivable is important to any business, but if you need to be as liquid as possible, these assets won’t count for much. This is because of the fact that they’re just sitting there with value that you can’t convert to cash right away. Accounts receivable for instance is an asset, but you won’t get to ‘spend’ it in the same way you spend cash, until your clients pay you, which will depend on your agreement. That could be next week, next month, or next year. If you need liquidity to spend for other important things now, then turning to asset-based lending is the perfect solution.

 

Proving Credit-Worthiness

 

Another advantage that you can get with asset based lending for inventory and accounts receivable as opposed to traditional financing options is that you don’t have to work so hard to prove your credit-worthiness. In fact, for options like accounts receivable financing, it’s the credit-worthiness and credibility of your customers that proves to be more important, because in the end, the lender will collect from them, not from you.

 

If you are interested in asset-based lending, please check out www.neebocapital.com. Neebo Capital has financial solutions that will help your business get the funding it needs for day to day operations as well as aid in its growth.

The Importance of Working Capital for Mid-Market Companies

In the world of business, it is the middle market that steers most economies. The U.S. middle market alone is one of the biggest in the world, contributing to the gross domestic product, employment, and growth. It is in the middle market that there’s a lot of room for potential growth and expansion, and this is why it can also be a very competitive playing field. If one operates in the middle market, the importance of working capital for mid-market companies should be astoundingly clear. Working capital is the lifeblood of any business, especially one that’s still trying to establish its place.

Innovation is the Key to Growth 

When you’re in the middle market, it’s easy to fall into the trap of contentment. You’ve found a stable place, established your brand name, and managed to get a few customers. But the reality of competition will soon come knocking at your door, which is why you can’t afford to stay stagnant.

Highly successful middle market firms know how important it is to constantly reinvent your business, and this is where innovation comes in. It’s important to invest in research and development in order to come up with exciting new offers and changes that will delight the customers. This is why you need working capital for mid-market companies. After all, if your working capital is tied up on other essential things, you can’t make room for R&D spending.

What Working Capital Can Do

Throughout the business cycle, it’s important to make sure that you have access to the capital that you need. Having working capital not only means you get to invest in innovation. It also means you can focus more on personalized customer relationship management, talent development within the organization, and making your vision a reality. You get to do all of this while concentrating on your key operations and making sure everything’s running as it should.

If you have equipment that needs to be bought or systems that need to be upgraded, your working capital should also be able to make these possible. Without sufficient working capital, you won’t have room to really spread your wings and do what’s needed in order to grow.

More Than Just Capital

In making sure you have your source of capital however, it’s not just the interest rate you should look at. You can check out factoring services and other working capital options at Neebo Capital but it’s important to keep in mind that it’s not just the low interest rates and stellar customer service you should be looking it. You should choose a lender that truly understands the needs of your business. If your lender understands the intricacies of your operations and the timeline in which your business operates, then it could offer a more customized approach and provide you with your much needed working capital for mid-market companies.

For more information about this or to discuss your options, please get in touch with Neebo Capital.

 

The Many Different Uses of ABL Loans

In the life of any business, there will be moments wherein cash flow is restrictive and you would need to borrow money to stay afloat. For the business to be set up in the first place, it is highly likely that some amount of money had to be borrowed. After all, it takes time for your investment to grow and for your capital to reap the rewards.

There will be many instances wherein you will need additional sources of funding, and this is where ABL loans come in. Asset based lending looks into your current assets and gives you additional cash flow based on the value of these assets.

Lenders could look at any of the available assets in your balance sheet, but typically, the loans available are the ones tied to your accounts receivable, equipment, real estate, and inventory. ABL lending gives companies flexibility and versatility, providing immediate cash flow as soon as the need arises.

But who usually needs asset-based lending? To understand this, we need to take a closer look at the many uses of ABL loans:

  1. Additional Working Capital

Working capital is the most common reason why companies need to take advantage of asset based lending. Particularly for those companies with very high receivables, an ABL loan will free up a lot of cash flow to be used for other more important aspects of the business.

The problem with having too much money tied up in receivables is that you barely have enough left for the day-to-day operations of your company.  How much more for expenses that are important in establishing your company’s future?

  1. Growth

When a company wants to grow and expand its operations, ABL lending will come in handy. This is because you’ll need additional money for capital expenditures, which may include additional equipment or machinery, an upgrade in physical assets, acquiring additional store space, and others. All of these expenses will require that you also have additional cash flow, and this is where your ABL loan can truly help out.

 

  1. Mergers & Acquisitions

Sometimes, the most logical thing to do to move up is to acquire another business or entity. But mergers & acquisitions, as sassy as they sound, require a lot of additional capital. You can’t buy another business if your money is tied up elsewhere, and this is why ABL loans can be the perfect solution.

  1. Turnarounds

When a business is not doing too well, you’ll need turnaround financing to revamp operations and give your business the boost that it badly needs. The reason why asset-based lending is most ideal for this type of scenario is that an ABL loan typically offers more flexibility compared to the usual loan options offered by banks.

 

  1. Stabilizing Seasonal Sales

For some industries, sales can become very seasonal. This means that there will be instances in the year wherein sales are very low, and you will have to wait months before the figures pick up again. ABL loans are there to help stabilize the seasonality of your products and services so you can still have sufficient funding to survive until your sales figures go up.

If you need an ABL loan, we’d be happy to help you. Please check out our website: www.neebocapital.com for more information about our services.

Different Types of ABL Loans You Can Apply For

Asset Based A/R + Inventory revolving line of credit ($1 million-$25 million+)

Most lenders tend to shy away from aggressive advance rates on inventory in today’s conservative lending environment, but not all of them.  Most banks and asset based lenders usually top out at a 40%-50% inventory advance.

Asset-based lending or ABL is one of the options companies can run to when cash flow becomes a bit of a challenge. There are many loans you can apply for, but these usually require collateral that the lender can take if the borrower ends up not being able to pay. Also, depending on the amount you need, most loans require that the borrower is backed up by stellar credit.

The advantage of ABL loans is that you can borrow money based on the existing assets that you have. ABL loan providers will review your asset portfolio and offer you a percentage of whatever these assets are worth.

Because most companies have varied asset portfolios, there are also various ABL lending options that you can apply for:

  1. Inventory Financing

Inventory is one of the main assets of any company, especially if you operate in certain types of industries. Depending on how much finished goods inventory you have, an ABL loan can give you up to 70% of the inventory cost. With inventory financing, you can apply for a credit line that’s worth as much as $4,000,000. This means that your inventory is not only good for selling, it can become the basis of your ABL loan approval as well.

  1. Accounts Receivable Financing

The total amount of your Accounts Receivable is another asset that can give you access to ABL loans. These Accounts Receivables typically consist of the money that you are expecting from various customers from goods and services that you have already given them.

You can apply for a loan that’s usually worth 80% – 90% of your receivables, and in most cases, the lender is given control over collecting the receivables. This will depend on the agreement between lender and borrower. This type of ABL loan transfers the risk of the receivables to the lender and also frees up your working capital so you can use it elsewhere.

  1. Equipment Financing

If you operate a company that needs various types of equipment, furniture, and software to run, the good news is that you can make use of these assets to apply for an ABL loan. It’s like hitting two birds with one stone, because you will certainly use this equipment for your operations anyway.

With ABL loans, your company can become more liquid without having to prepare too many reports for the lender. If you need cash and you need it now, asset based lending can really help you out because it uses your assets as collateral. Compared to other types of financing, asset-based lending typically has fewer covenants to adhere to, so borrowers have more flexibility with this compared to other options.

We offer high advance rate on A/R (85%-90%) with an aggressive advance rate on inventory (65%) the results maximize our client’s growth capital.

Save Your Business Working Capital with the Help of Equipment Finance

Advantages of Equipment FinanceIf you plan on starting a business today, you’ll need some tools and equipment, and these things cost money. If you set up an office, you’ll probably need computers and software. If you own a construction company, you’ll need heavy duty vehicles. If you open a hospital, you’ll need X-ray machines and other similar equipment. All these things are expensive which is why it is necessary to have sufficient business working capital.

Features of Equipment Finance

If you spend all your startup money in expensive equipment, you may not have enough business working capital to deal with day-to-day expenses such as salaries, rent, and utilities. Fortunately, you can free up some money to improve your cash flow through equipment finance. Essentially, you get a loan with your equipment as collateral. If ever you fail to make the payments, the equipment will be taken away from you.

One factor that needs to be considered here is that the loan cannot be more than what the equipment is worth. This is obvious, since if you default on the loan then the equipment won’t cover the amount you owe.

Another consideration is that the loan period cannot be longer than the useful shelf life of the equipment. Some types of equipment simply become obsolete after a few years.

Advantages of Equipment Finance

With equipment finance, you can take advantage of several benefits which you may not get through other means:

  1. This method of financing can be very quick and easy to arrange. This is especially true compared to other traditional forms of financing. Banks, in particular, move like molasses in granting such a loan. That is, if you even find a bank willing to provide this kind of financing.
  2. Once you get the money, you can easily solve your cash flow problems. You now have the money available for various daily expenses so that your business can operate more smoothly and efficiently.
  3. You can also use the money to develop other aspects of your business in order to increase your revenues.

Leasing

Keep in mind, though, that if you plan on using equipment finance you may want to do so even before you buy the equipment. You may be able to make regular partial payments for the equipment you need rather than spending a bulk of your business working capital on it. So in a way, you’re leasing the equipment.

By getting equipment financing this way, you may be able to avail of the latest high-tech equipment right away, which gives you a significant advantage over your competitors. You may even gain access to specialized equipment through the leasing company, which may have special working relationships with equipment manufacturers who produce what you need for your business.

This can also improve your cash flow so that you can deal with overhead expenses and also have enough money for growth and expansion opportunities when they arise. Leasing also protects you from having to hang on to equipment that has become obsolete, which can hamper with your business goals.

Need Equipment Finance? Click here to visit our lending site.

 

ABL Credit Lines

Advance rates up to 70% of inventory cost and 60% of equipment value. Credit lines ranging from $100,000 to $4,000,000.

 

What Are ABL Credit Lines?

ABL stands for asset-based lending. What is asset-based lending, you might ask? In the simplest sense, it is any type of lending secured by an asset. What that means is that if the loan is never repaid, then the asset is seized. That seems fair, right? A mortgage is one of the most common asset-backed loans.

But, Wait A Minute. What Is An ABL Credit Line?

In its simplest sense, an ABL credit line is a credit line secured by assets.

Most major banks offer some form of asset-based lending. Almost all major banks offer a number of asset-based solutions for a wide variety of highly advanced financing needs. Flexible asset-based lending solutions are essential to the expansion of business. Credit lines can range from $5,000 to more than $1 billion, and asset-based credit lines can be extensively higher than ordinary credit lines because hard assets provide collateral security for the line of credit. However, many small businesses are recipients of asset-based credit lines, even though their assets are less valuable than those of mid-range and multinational corporations.

What Are Some Of The Advantages Of Asset-Based Lending Solutions?

MEET SEASONAL CASH NEEDS: You may have a healthy business with a positive cash flow, but your business may be prone to slumps during certain seasons. An asset-based credit line can extend you credit to maintain and grow your business even during those slumps.

INCREASE WORKING CAPITAL: Whether it is your task to grow or expand your business, need to meet short-term cash flow needs, purchase finished goods or raw materials, cover work-in-process, or begin financing extended payment terms to overseas buyers, an asset-based credit line can get you the capital to do that.

MERGER & ACUISITION: Asset-based lending is frequently used as a smart way to get funding for new business acquisitions. Sometimes, a business has to buy out a partner or a competitor to get ahead. Businesses sometimes need to grow by going after mergers & acquisitions, and, sometimes, the only way that those kinds of big deals are possible is through an asset-based credit line.

GROWTH: Usually, as a business grows, so does its need for financing. Furthermore, as a company’s collateral increases, its assets further its ability to borrow more cash. A creative and experienced asset-based lender can put together a credit line that will scale with any kind of company.

TURNAROUNDS: Turnaround financing is usually pursued by businesses that are under-performing and not seeing all their potential for income. Asset-based lenders are familiar with this kind of situation, and asset-based financing is perfect for turnarounds since they are tremendously versastile.

These are just some of the things that an asset-based credit line can do for businesses. What can it do for your small business? Don’t be afraid to put your assets on the line if you believe it will help your business grow. Get a trusted financial advisor to take you through the process of procuring a credit line today.

Do you need an ABL Credit Line for your business? If so Click here to visit our lending site.

2014 Asset Based Business Loans

Yes, We Do Inventory Financing:

  • Advance rates up to 70% of inventory cost and 60% of equipment value
  • Credit lines ranging from $100,000 to $4,000,000

What Is The Asset-Based Business Lending Process All About?

 

Credit lines ranging from $100,000 to $4,000,000
Credit lines ranging from $100,000 to $4,000,000

Asset-based lending is lending that is secured by a company’s collateral. Things like real estate, equipment, inventory, and accounts receivable are all used as collateral for loans. The lender will take a first priority security interest in the financed assets. It is just one of many ways that a company can secure working capital and term loans. These loans are secured by machinery, equipment, or any other assets the business owns, as well as real estate. Funds can advance based on a percentage of the accounts receivable.

 

An asset-based loan is usually comprised of a revolving credit line that doesn’t have the common kind of structured repayment plan, and is done an interest-only basis. Funds can be advanced as a percentage of accounts receivable or inventory, usually between 60-85%. There are higher advance rates based upon seasonal fluctuations or appraisal of other kinds of business assets, however; although, not all banks and financial institutions have such flexible lending terms. It is worthwhile pursuing a bank, or department thereof, that specializes in the kind of business you run. You may be able to get a more favorable deal, and you will certainly be working with someone who understands your industry.

 

What Are The Functions Of Asset-Based Business Loans?

 

WORKING CAPITAL: The assets that can be applied to a company’s operations are categorized as working capital assets. Sometimes, working capital loans are required to bridge financial gaps throughout the lifecycle of a business. Working capital loans are often divided up and shared by a number of kinds of assets, like accounts receivable, real estate, equipment, and inventory.

 

CAPITAL EXPENDITURES: Capital expenditures is the cash spent to get, or frequently upgrade, physical assets like machinery and buildings. Capital expenditure is usually referred to as capital expense or capital spending.

 

BUYOUTS: A buyout is the purchase of a controlling percentage of company stock. With a leveraged buyout, the company who is doing the acquiring uses the least amount of equity possible to buy the other company. The other company’s assets function as collateral for the debt, and its cash flow is then used to retire the debt that is accrued by the purchaser to buy the company.

 

What Are The Benefits Of Asset-Based Business Loans?

 

VERSATILITY: Asset-based lending offers instant and ongoing cash flow, and it can be used to buy supplies and materials, keep up with seasonal fluctuations, stay on top of operating and payroll expenses, keep payables current, and so on.

 

NO BURDENSOME REPORTING: Usually, asset-based lenders require a very small amount of reports like a monthly aging or INV & AR. However, each loan is unique so the reporting requirements will be tailored to each unique loan.

 

What can asset-based business loans do for your business? Are you having trouble growing or expanding your business? Do you feel stuck in the muck with no capital to proceed? If you have assets, you may be able to secure loans to get your business moving again.

Need WORKING CAPITAL for your business? Click here to visit our lending site.

Inventory Finance combine with Accounts Receivable Finance

Need Inventory Finance combine with Accounts Receivable Finance?
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Inventory Finance combine with Accounts Receivable Finance
Accounts Receivable along with Inventory Finance is a fundamental form of commercial lending.

Accounts Receivable Inventory Finance is a fundamental form of commercial lending that is collateral based. This type of financing combines elements of short term business loans with secured lending. In the purest form a commercial borrower will use the value of their receivables and their working assets or inventory as collateral to secure financing as a way to produce and market their services and products. Financing is repaid when the inventory is converted to cash. This is done either from direct sales or through collecting accounts receivable notices. Depending on the borrower’s risk profile, the lender will exercise different degrees of control over collateral in order to minimize the risk of the transaction.

 

ARIF Variations

 

There have been many variations of ARIF developed over the years. There are some forms of ARIF that will include assets other than inventory and receivables. In addition, the controls over the collateral have been changed and repayment sources are expanded to not only include the conversion of working assets.

 

This type of loan used to only provide funds to finance inventory, but now can be used for financing acquisitions, restructuring debt, and to hold companies through times of distress. Service organizations, importers, retailers, distributors, wholesalers, and manufacturers all use Accounts receivable inventory finance to meet the needs of their business. While there have been several changes made to this form of financing, it still remains one of the most essential ways for a borrower to leverage their assets in order to get financing.

Why Use Accounts Receivable Inventory Finance?

 

Many ARIF relationships have a moderate to high risk. A borrower will turn to this type of financing when they are unable to get another type of financing. Borrowers using this type of financing are typically not as financially strong as another commercial borrower. There are some reasons for this, perhaps their company operates in an industry where there is significant seasonality or has a high volatility. Some companies are experiencing a rapid growth and need the money quickly. This type of borrower exhibits a higher risk of default characteristics including:

 

  • High leverage
  • Marginal profitability
  • Limited cash reserves
  • Limited working capital
  • Collateral pools that are constantly changing and whose value could fall quickly.

ARIF Structure

 

ARIF transactions that are properly structured will limit the risk of default by imposing certain controls on both cash and collateral of the company that has borrowed the money. When the loan is margined properly and prudent control processes and monitoring is applied by the bank, the risk of loss can be less than some of the other types of commercial lending that is available. The key is to minimize the risk. When a borrower poses a significant amount of risk, the lender will need to implement more control over the loan. Lenders have to have a large amount of management expertise including a great understanding of the business that the borrower is in and good reporting systems. In addition, the lender must keep ongoing supervision of the relationship and collateral of the borrower.

 

Need Inventory Finance combine with Accounts Receivable Finance?   Click Here

 

Asset based lending for inventory – sell inventory for cash

What is asset-based lending?

When businesses need inventory, they may turn to asset-based lending. Asset-based lending is a form of lending based on the assets that a business has. These assets are put up as collateral to lenders. If the business can’t pay back the loans, then the assets will be taken by the lender to help repay the loan. Sometimes, businesses need inventory, and they don’t know where to turn to get the funds to buy it. Asset-based lending can help with that issue.

 

In the simplest definition, asset-based lending is any form of lending that’s based on an asset. What that basically means is that if the loan is not repaid, then the asset is taken. That’s why a lot of small business owners don’t like the idea so much. If their business idea doesn’t pan out, and they put up an asset, and then they have to give up that asset, then they’re in a worse place than they were before, and they may not be able to make a start again. More often, the term is used to talk about lending to big corporations and mid-sized businesses who want to use assets that aren’t normally used in other loans. Usually, these loans are connected to equipment, machinery, accounts receivable, and inventory.

 

This kind of lending is often done when ordinary routes of getting funds, like selling equity to investors or ordinary unsecured bank lending is impossible. It’s not one of the most common kinds of lending because it puts businesses in a seriously bad position if they can’t repay the loan and have to lose their assets. It’s usually used after the other forms of funding are closed off, for one reason or another. These kinds of loans are usually given because the company was unable to get the capital in the ordinary marketplace or have to get more immediate capital for big project financing. It is often accompanied by high interest rates too, and it can be extremely lucrative for the lending company. One major bank made more money from asset-based lending than they did from any other kind of lending or corporate business.

 

An asset-based line of credit is often designed for the same function as an ordinary business line of credit – to let the company bridge itself between the time of payments it receives and the ordinary business expenses. The main timing issue usually has to do with what are referred to as accounts receivables – the delay between selling a good or service to a customer and then getting payment for it. Since that gap can be quite large, and the money needed to grow the business needs to be immediate, there are often these kinds of loans to help the business get going and stay going even before they’re received payment.

 

Need an asset based loan for your business? Click here