Asset based lending is a unique type of loan that is secured by a specific asset or a combination of assets, usually its accounts receivables and/or inventory. The company in need of funding pledges their assets, as collateral, for a loan given by a financing institution. Although the company still owns the assets that they pledge, they can be taken away if loan payments are not made in a timely manner. Asset based lending can be a great source of working capital for quickly growing companies and can be used to other purposes as well. With asset based lending, the company does not have to give up ownership to obtain working capital which is the case with equity financing.
Asset based loans are perfect for:
- Financing expansion
- Acquisitions and business mergers
- Management buy-outs or buy-ins
- Turnaround financing
- Refinancing existing business loans
Why consider asset based financing for capital?
- Leverage sales growth today
- Commercial real estate and equipment can be assets used for this type of funding
- The lack of flexibility through regular bank financing is no longer an issue
- Revolving credit lines can be secured by raw materials and finished goods inventory
- Access large amounts of cash that have already been invested in the infrastructure