What is Asset-Based Lending?
Commonly referred to as asset-based loans or ABL loans, this refers to business loans secured with the use of an asset as collateral to repay a business’s debt instead of relying on just cash flow or credit score. The company has the ability to immediately use all the cash in the company’s account payable account, the agreed-upon value of equipment or property, or stock on hand, whatever asset is used as the basis for the loan. Asset-Based loans can be shaped as revolving credit instruments, enabling a business to reinvest or use assets to cover the costs of its operations.Â
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.
What is ABL Finance?
ABL finance is the process of evaluating assets as a viable form of leverage in support of a loan. ABL financiers want to determine if the asset has sufficient value to back up the loan, but they aren’t just interested in the value of your asset. They also want to determine if the cash flow will be sufficient to pay off the loan. They only want to seize assets as a last resort. That’s why Asset Backed Financing firms look at your overall borrowing to make sure you are not over leveraged. An over leveraged business will be at risk of default because revenue may not be sufficient to cover the costs of the loans and the cost of operations, marketing and profit.
Inventory Financing
An Inventory Asset Loan is typically secured by the value of what is being purchased. Qualified applicants must show that the loan can be repaid with the sale of the inventory. Our Inventory loans serve business owners who have been denied a conventional loan due to credit history or some other factor.
If proper requirements are met, funding may be provided for up to 90% of the cost of the inventory. Inventory loans cannot be used for the purchase of property for its potential future value, or for the purchase of real estate. Asset Based Inventory Loans are the easiest option in terms of repayment and collateral requirements for the purchase of inventory.
Commercial Real Estate
An asset-based Commercial Real Estate Loan is based on the value of a business’s real estate. The property owned by the business applying for the loan will be used as collateral to secure the note. This collateral provides the lender with the additional security needed to provide financing for businesses that have a less than stellar credit history.
Funding can be provided for up to 90% of the value of the property, and unlike the more traditional real estate loans, asset-based real estate loans allow funds to be used for a variety of business needs such as smoothing over cash flow issues, or funding expansion outside of real estate.
Accounts Receivables
An accounts receivables loan is based on the amount of owed money coming into a business in the future through invoices, or billing. Funds can be used for daily operations, including the purchase of inventory, employee wages, and utility payments.
Small businesses with 2 years’ prior tax returns and proof of ability to repay the loan are easily qualified for up to 100% financing. Our accounts receivables loans are repaid as funds become available and typically carry a low APR. In addition, A/R loan credibility is typically based on the creditworthiness of a company’s invoiced customers, making it a great fit for businesses with a strong client base, but weaker credit history.
Equipment Loans
Our Asset-based equipment loan amounts are calculated using the value of the businesses already owned equipment. To qualify, the equipment must have long-term value, and be used solely for business purposes. Our asset-based equipment loans can be used for the purchase of upgrades, construction, and daily operations.
Funding is provided based on the value of equipment, and that same equipment will be used as collateral for the loan. With up to 90% financing available, and an APR between 5% and 15%, this loan is readily available to small businesses with a less than desirable credit history.