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Asset Based Lending Companies - How Do Asset Based Business Loans Work?

Updated on December 11, 2013

All About Asset Based Lending

The Power Of Asset Based Lending

Many commercial companies have heard of factoring that purchases account receivables at a discount, however with Asset Based Lending a loan is made using assets as collateral while providing capital for equipment, payroll and/or necessary inventory; which in turns keep companies performing and competing in the US and globally more effectively. Most importantly you will have to prove your business is growing and you are able to repay the loan in the near future. The loans are usually short term.

Banks or entities that offer asset based loans rather give larger loans because the cost of monitoring the smaller loans cost the same. If a company is running smoothly with regular paying clients and impressive receivables there should be no problem attaining a loan.

The downside is if your using receivable as an asset and you have many customers that don't pay on time, this will affect the amount you receive.

Asset Based Loans allows businesses to attain the money they need without the hassle of qualifying for traditional bank financing.

  • paying customers
  • commonly sold inventory
  • great financial statements

What Is Asset Based Loan?

Asset-Based loan is secured with an asset. It can be secure with one or several assets.The percentage is generally 70 percent to 80 percent of eligible receivables and 50 percent of finished inventory.

Not all ABLs have high interest rates, however there are expenses in additional to losing asset if there is a default in repayment of the loan. If the loan is not re-payed, the assets are taken as repayment of the loan along with fees.

  • quality accounts receivables
  • inventory
  • Real Estate
  • patents

Why Do Companies Use Asset-Based Lending Companies?

There are a few reason uses asset based lending companies which basically mean "we need money and can't get it the traditional way". In most cases an Asset Based Loan is sought because the company does not have the needed history or credit traditional bank loans require.

  • Income is not available to finance business.
  • Credit history is poor.
  • Down payment is needed for expansion.

What is the process?

Receiving a loan of this type can be very intimidating and you comfort level will certainly be tested. People that lend large sums of money have it in their best interest to lessen their risk. You will acquiring a partner during the duration of your loan or line of credit. That being said here are few things you may have to expect.

  • Receivables being paid elsewhere.
  • Financial statements and assets scrutinized.

There are many asset based lending companies on-line that can assist you. Now that you know how you can get the money you need, what you might expect and what you may risk, you can move forward and find an asset lending loan match. It is imperative to find out what what you will be agreeing to. Obligating yourself to a loan of this type should only be made when you know all of the facts.

There are no obligations when inquiring for assistance of this nature. You owe it to yourself and business to find out everything you need to know about anything that can affect your business and financial future.


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