Small- and mid-sized companies often find themselves in situations where traditional financing solutions are insufficient or unavailable. Asset based lending could be the right source of capital for businesses that require a flexible solution.
Links Financial’s team of financial advisors is backed by 30 years of experience helping business owners secure the money they need through asset based lending. We serve as your liaison with an extensive financial network, explaining the loan process and streamlining your path to success.
What is Asset Based Lending
An asset-based loan is financing you secure by using your company’s assets as collateral. Most of these loans are structured as a line of credit, but they may also take the form of a term loan. You can use asset-based loans for a variety of purposes, including business acquisition, working capital or in turnaround situations.
The two most commonly used assets are accounts receivables and inventory. Asset-based lenders are not concerned with the profitability of the company, just the quality of the receivables and assets that the company has.
The borrowing base is the amount of money an asset-based lender will let you borrow based on the value of the asset. For accounts receivable loans, a lender will typically let you borrow 75 percent to 85 percent of your receivables; this is also called lending on receivables. Any invoice sent out (debt owed to the company) is considered part of accounts receivable. With receivables financing, the borrowing base can fluctuate based on the amount of receivables outstanding. The typical turnaround time to receive cash through receivables financing is between five and 10 days; sometimes it is sooner.
For loans based on inventory and other fixed assets, lenders will typically loan you 50 percent to 60 percent of the value of the asset. The amount you can borrow based on fixed assets is less than with receivables financing because fixed assets are not as liquid as debt (receivables) owed.
You can obtain accounts receivable loans and asset-based loans individually or in combination. For example, if you have $2 million in accounts receivables and $1 million in assets, you would be eligible to get a loan for between $2 million and $2.4 million.
Is Asset Based Financing Right for Your Business?
With asset-based financing, you are putting future income on the line in exchange for immediate cash. Our experienced advisors at Links Financial can help you evaluate your assets, identify key issues involved with this type of financing and help you determine whether asset-based financing is a viable option for your company.
Links Leads the Way in Creative Financial Strategies
Obtaining funding for your business can be complicated, confusing and time-consuming. By partnering with Links Financial, you’ll have access to qualified financial consultants who have the expertise and financial relationships to create financing solutions for your company. We tailor our strategy to meet the ever-changing needs of our clients, and our track record testifies to our commitment to ensuring your success. Give us a call today to learn whether asset based lending can play a role in your financial strategy.