Asset-based lending may provide your business with the perfect way to balance seasonal cash flow fluctuations, capitalize on growth opportunities or finance a higher leverage or debt position. A range of assets, such as inventory, accounts receivable, machinery & equipment, real estate as well as brand names or intellectual property can serve as collateral against this form of loan financing.
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Asset based loans provide small and midsized businesses with financing solutions based on the value of their collateral – such as inventory, accounts receivable and equipment. They’re an ideal alternative to traditional business loans for growth, acquisition or turnaround financing needs.
Inventory is often utilized as collateral in asset based lending arrangements and can serve both revolving credit lines and term loans. Lenders will assess the resale value of your inventory to assign a liquidity ratio; machinery and equipment financing also often utilize this form of financing with lenders assessing their make, model and year to establish its resale value and assign liquidity ratios accordingly.
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Asset Based Lending (ABL) has quickly established itself as an efficient and cost-effective means of funding businesses, particularly those in capital intensive industries such as manufacturing or distribution. ABL financing solutions can also be utilized for growth initiatives, turnaround strategies or meeting working capital requirements.
An asset-based loan provides greater flexibility than other small business loan options, with consideration being given to assets such as inventory, accounts receivable and equipment instead of historical profitability and cash flow. Plus it may be easier to qualify for as it doesn’t rely on your company’s creditworthiness alone!
ABL lenders monitor asset exposure regularly and are more apt to work with unique situations. Furthermore, ABL loans typically require fewer financial covenants than other loan types – something which may prove advantageous for borrowers experiencing fluctuations in cash flow or having an uneven credit history.
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Asset-based lending provides business owners looking for non-credit based financing with an alternative solution that’s less reliant on credit scores: this loan type is secured against your company assets such as inventory or accounts receivable, making them much cheaper than other options while also giving them leverage without giving up equity.
Lenders typically prefer highly liquid collateral such as certificates of deposit or securities that can quickly be converted to cash in case of default. Physical assets pose more of a risk, with lenders typically only providing up to 85% of their marketable value as security.
Asset-based financing can serve a number of functions, from filling cash flow gaps to investing in new opportunities. Unfortunately, however, certain assets do not qualify as collateral such as specialized inventory or perishable equipment.
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Asset-based lending facilities provide flexible loans based on the value of your assets that can meet a wide variety of financial needs, from retirement or investment funds to business cash flow enhancement. They are tailored specifically for you.
Asset-based financing often uses accounts receivable, inventory and fixed assets as collateral, with lenders assigning forced liquidation or FMV (fair market value) estimates and providing availability based on those amounts. Other valuable collateral includes specialized equipment, intellectual property or brand names that could serve as security. Asset-based lending may be ideal for businesses experiencing seasonal or cyclical fluctuations in revenue streams.
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Asset-based loans enable businesses to leverage assets like equipment and accounts receivable. These loans are secured against these assets’ values, boast shorter loan terms than other forms of financing and have lower interest rates than traditional bank loans; additionally, asset-based lending typically imposes less restrictive borrowing covenants than traditional business financing options.
Asset-based lending differs from mortgages in that it doesn’t require you to verify your income or submit tax returns in order to qualify. Instead, this loan type focuses on the values of your assets and may make qualifying easier than traditional lending options. Furthermore, asset-based lenders monitor asset exposure regularly which provides proactive solutions for working capital cycle fluctuations.