Described by some as commercial financing or asset-based financing, asset-based lending is simply a form of a business loan that is secured by the assets belonging to the business in question. It can be a flat loan or line of credit, but to qualify as commercial financing of this kind, it is “secured by inventor, AR, equipment or other balance sheet assets.”
Who Uses Asset-Based Lending?
Of course, it is but one way a business can obtain funds, but it is unique as it may prove beneficial to a firm without the ability to, yet, repay a loan through cash flow. Does this sound like your current scenario? Do you have some cash flow needs (i.e., inventory, payroll, or a need to expand operations) but are without the income to prove your firm capable of repayment? If you, instead have assets to pledge as collateral, you may be able to enjoy the benefits of asset-based lending.
Liquidity is Valuable
A lender may be able to assess the assets, and if they have the right value and/or liquidity, this may be converted to a cash loan. The amounts supplied are going to vary based on the actual assets offered as security, and the more liquid your pledged assets, the higher their loan to value ratios.
Reason to Choose Asset-Based Lending
Why secure a loan in this way when you might pursue an unsecured loan? In a word: interest. The rates on any secured loan or line of credit are measurably less than unsecured options, and are often as low as 7% and usually capped at 17%.
If you wish to learn more about asset-based lending or have some strategic planning goals in mind, contact Himsl Consulting online or by phone at 803-828-0314. Working with businesses of all sizes and, they provide resources that allow you to use capital in the wisest ways possible.