Let’s start writing your success story by utilizing your assets. Some businesses can maximize debt capacity by using their assets instead of their cash flow. Asset-based lending (ABL) is a smart way to borrow, especially if seasonal or cyclical fluctuations or sudden growth are putting a strain on liquidity. We can help by leveraging your existing assets – accounts receivable, inventory, machinery, real estate – to give you borrowing power that costs less than conventional loans. ABL is often structured as a revolving line of credit, with typical terms extending from three to five years. As your assets grow, so can your credit facilities.
Getting a line of credit or term loan isn’t an overnight decision. There are lots of options to consider and each comes with unique questions.
But don’t worry, we’ve seen it all and can help you through it.
We offer any option a business needs:
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An asset-based loan is a loan secured by certain tangible assets on a percentage of the value of those assets. When a business does not qualify for conventional financing due to its credit profile or cash flows, asset-based loans may be an option. While a business’s financial performance is a consideration in underwriting an asset-based loan, the primary source of repayment and focus are the company’s assets.
Asset-based loans can be lines of credit or term loans. Revolving lines of credit are governed by borrowing bases with different advance rates applied against accounts receivable, inventory, and in some cases, term assets subject to certain caps. Term loans are based upon the appraised value of underlying term assets at certain rates of advance.
When you want to maximize your debt capacity, but with flexibility – especially in rates and terms – an asset-based loan might be right for you. Asset-based loan candidates typically include manufacturers, distributors, wholesalers, or business services. It’s also ideal for businesses that are going through a time period with elevated risks. Common circumstances to consider asset-based loans may include:
Businesses can qualify for asset-based lending if they are located in the United States with at least one year in business, have capital needs of at least $5MM, and have assets such as accounts receivable, inventory, equipment, or real estate that can be pledged as collateral.
Accounts receivable, inventory, machinery and equipment, real estate, and intangibles can be pledged as collateral in asset-based loans.
A borrowing base is a calculation of the debt capacity of the borrower. The calculation includes the pledged assets multiplied by advance rates. Advance rates are set by asset type with defined terms for eligibility. Borrowers report a borrowing base certificate to support their debt capacity periodically but no less than monthly. The collateral is examined by third party auditors regularly to determine compliance and update the value of the borrowing base.
From the signing of term sheets, transactions typically close within six to eight weeks. However, the amount of time required is highly dependent on due diligence requirements (mix of field exams, appraisals, etc.), flow of information, and negotiations of loan documents. We provide quick initial indications of interest after receiving financial information and strive to provide credit-vetted term sheets within one week of receiving required financial information.
We offer competitive risk-adjusted pricing. In addition to the cost of the loan, typical costs include: field exams, legal, and appraisals. Estimates can be provided upon request.
If you are interested in learning more about asset-based lending, please contact a member of our team to discuss a tailored solution to meet your needs.
All loans subject to credit review and approval.
Fees may apply. Contact us for further detail.
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