Call us now at 1-800-598-1178
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This page contains some
basic information about our asset based lending services. If your
question is not covered here, please call us at the above number to
discuss your
question.
- What is an asset based
loan or asset based lending?
An asset based loan is a loan that is collateralized primarily by
receivables and inventory. Other assets such as equipment and
real estate may also be considered during the underwriting process.
- What proportion can each
type of asset contribute to the asset based loan?
Most of our our underwriters will want to see receivables contributing
at least 50% of the collateral value of the asset based loan
amount. The contribution of the other types of assets will vary
based on the situation
- How do you determine how
much the asset based loan or asset based line will be?
The asset based loan amount is determined using the following basic
guidelines.
- receivables - up to 80% of the value of accepted
receivables
- inventory - up to 40% to 50% of liquidation value
- equipment - up to 50% of auction value of the equipment
- What types of companies
may be candidates for an asset based loan?
The following is a partial list of companies and situations that
benefit from an asset based loan.
- growing manufacturing companies
- distributors
- wholesalers
- service companies
- companies with improving financial health that have had
their credit limits frozen or reduced by their banks
- What is the minimum asset
based loan?
The minimum asset based loan is on the order of about $300,000.
- What is the maximum asset
based loan provided by your company?
The maximum for our underwriters is in the range $2 million to $10
million.
- Does the collateral for
the asset based loan need to be appraised?
Yes. The collateral will need to be appraised as part of the
underwriting process, and the value of the collateral will be monitored
over the life of the asset based loan.
- What is the term of an
asset based line or loan?
The term varies from 2 to 4 years.
- Is a personal guarantee
required to obtain an asset based line?
Yes. A personal guarantee will be required to obtain an asset based
loan.
- How important are the
financials of my company in obtaining an asset
based loan?
The company will be evaluated to determine its ability to repay the
loan
going forward.
- My bank already has a lien
on all my receivables and other assets. Can an asset based loan be
gotten in
this situation?
Maybe. Most often the underwriters for an asset based loan will want
to use a portion of the asset based loan to retire any outstanding bank
obligations. If this is not possible, then a subordination agreement
may be another option. Under this option the bank would allow the
asset based lender to have first lien position on those assets securing
the asset based loan..
- How does an asset based
loan differ from factoring?
An asset based loan and factoring both use your company's accounts
receivable to determine the amount of money made available to your
company. They differ in the following ways. With factoring
your company is actually selling the invoice to the factoring
company. With an asset based loan your company maintains
ownership of the invoices as long as your company does not default on
the loan. Factoring is transaction oriented where an asset based
loan is not. Each invoice is processed individually by the factor
while the asset based lender does not get involved in each individual
transaction. Each factoring transaction is usually limited to a
30 to 90 day time frame while an asset based loan will typically have a
2 to 4 year time frame. Factoring is available for transactions
as
small as a few thousand dollars while asset based loans usually start
around $300,000 and go up from there. Factoring looks more at the
credit worthiness of your customers while an asset based loan shifts
much more of the credit worthiness on to your company. Factoring
does not create debt for your company while an asset based loan does.
Factoring can only be based on your accounts receivable to create
working capital while an asset based loan can include inventory,
equipment, and real estate.
- What are the fees and
rates for an asset based loan?
Each of our underwriters has different fees that they charge to setup
the asset based loan and fees that are charged during the term of the
loan. Some of these fees are listed below.
- appraisal fees
- lien search fees
- monthly management fees
- monthly interest fees (prime plus a number that varies
by underwriter and situation)
The rates that are charged will probably be higher than bank financing.
The rates vary by underwriter and your company's situation.
If you have additional questions, or if you would like to start the
process to determine if an asset based loan can be obtained by your
company, please
click here
to contact us.
Call us now at 1-800-598-1178
to get started. |