Asset Based Lending is a dynamic and seldom used form of financing. The reason for that is our traditional way of thinking which limits us from thinking outside the
box. We associate Loans with standard banking practices when we really need flexible and creative access to Working Capital to achieve our goals.
What are Asset Based Loans?
Asset-based loans are usually from commercial finance companies (as opposed to banks) that are offered on a revolving basis and collateralized by a company's assets, specifically accounts receivable and inventory.
What is the purpose or function of an Asset Based Loan?
Typically Asset Based Loans provide short (and sometimes long!) term restructuring of a companies' financial situation in a way that facilitates
Maximal Cash Flow. One purpose of this type of lending is to provide a limited period of recovery time and a financial operating environment whereby a company can demonstrate how it can perform were it to have a long term loan in place.
What companies is Asset Based Lending appropriate for?
Asset based loans are appropriate for companies that may be rapidly growing, highly leveraged, in the midst of a turnaround or undercapitalized. In addition, asset-based financing works only for companies with proven accounts receivable, and a demonstrated track record of turning over their inventory several times each year.