All About Asset Based Loans!

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The Ins and Outs of Asset-Based Loans
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What it is
Asset-based loans are based on assets, generally
accounts receivable and inventory, that are used
as collateral. You're putting your future revenue
on the line to gain access to money right now.
3
What it is
Asset-based lenders will advance funds based on
an agreed percentage of the secured assets'
value. The percentage is generally 70 percent to
80 percent of eligible receivables and 50 percent
of finished inventory.
4
How to get it
The range of financial service companies that
offer asset-backed lending is huge. The
Commercial Finance Associations membership
includes banks and many independent finance
companies.
5
How to get it
For a small business, the key is to find the
lenders that are willing to offer lines of credit
to younger companies. This can be tricky, and
could involve some asking around. Asset-based
lenders would prefer to make larger loans because
the cost to monitor an asset-based loan is
generally the same whether it's large or small.
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How to get it
To secure an asset-based loan come to the table
with financial information that is detailed and
accurate. The key is to make the lender
comfortable with a credible case for long-term
viability, as well as professionally-prepared
financial statements that prove you have a handle
on the business.
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Upside of Asset Based Loans
Asset-based loans can be a much-needed source of
capital for companies that are rapidly growing,
highly leveraged, in the midst of a turnaround or
undercapitalized. Sometimes a company simply
needs that infusion of cash to get over a
financial hump or prevent growth from stalling
out.
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Upside of Asset Based Loans
The loans are especially well-suited for
manufacturers, distributors and service companies
with a leveraged balance sheet whose seasonal
needs and industry cycles often hamper their cash
flow. Asset-based loans can also be used to
finance acquisitions.
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