Asset Based Lending

Quickly & Easily Grow Your Business

Asset Based Lending

Asset Based Lending

What Is It: Asset Based Financing is usually made by commercial lending companies (as opposed to banks) and are typically offered on a revolving basis.

These loans are collateralized by a company’s assets, specifically accounts receivable and inventory.

Companies that may be rapidly growing, highly leveraged, in the midst of a turnaround or undercapitalized are those who usually take advantage of this type of lending.  Additionally, asset-based financing works only for companies with proven accounts receivable as well as a demonstrated track record of turning over their inventory several times each year.

Best Use: Financing rapid growth in the absence of sufficient equity capital to fund receivables and inventory. Asset-based loans can also be used to finance acquisitions.

Cost and Funds Typically Available: More expensive than bank financing since asset-based lenders generally have higher expenses than bankers. Still, pricing is very competitive.

Ease of Acquisition: Comparatively easy if the borrowing company has good financial statements, good reporting systems, inventory that is not exotic and, finally, customers who have a track record of paying their bills.

To successfully negotiate an asset-based deal, borrowers must come to the table with financial information that not only paints a positive picture but also is detailed and accurate. They must also be willing to make the lender comfortable. Among the requirements…

  • The business must have a reasonable net worth and long-term viability.
  • Financial statements must be reviewed by a certified public accountant whom the lender deems acceptable.
  • Borrowers must submit a year’s worth of monthly projections.
  • The business’s principals must guarantee the loan, and the guarantee must be supported by personal financial statements.
  • Keyman (or keywoman) life insurance may be required

For More Information About Asset Based Lending, call our professionals at 480-239-9879