Guide to Asset-Based Lending
For businesses that have assets and need more working capital, asset-based lending can be a highly beneficial alternative funding source.
What is Asset-Based Lending?
Asset-based lending is a business loan that is secured through the collateral of a company’s assets. The collateral is often a company’s accounts receivable, but assets such as inventory and equipment can also apply. Asset-based lending is a great option for businesses with unpredictable future cash flow. The amount of money provided by a lender is based on the appraised value of the collateral, giving businesses a much-needed boost for stable cash flow.
How does asset-based lending work?
To get an asset-based loan, you need to pledge your assets as collateral. Terms and conditions will depend on the appraised value of the collateral. Liquid assets, such as Accounts Receivable give you far more favorable conditions for your asset-based loan.
The most common types of collateral used in Asset-Based Lending:
Accounts receivable: Any accounts receivable due within 30-60 days can be eligible as collateral. A lender favors accounts receivable as collateral because of its liquidity. The amount that a lender will advance depends on many factors, but you can expect to be advanced larger amount of the outstanding receivables balance than any other collateral.
Inventory: This is another collateral that most manufacturers, retailers, and wholesalers typically use. The borrowing base will depend on the nature of the goods, margins, and the liquidity of the inventory.
Real Estate and Equipment: They are usually considered a less-liquid asset but can be pledged as collateral. Due to the less-liquidity, collateralizing equipment or real estate requires special consideration.
Why Accel Business Funding?
With our expertise in asset-based lending, Accel Business Funding has supported many businesses like your business with necessary funding. Below is why you should choose Accel Business Funding for your funding needs:
Quick: Accel Business Funding can provide funding in short time frame (less than a week)
Simple: With simple application and documents, Accel Business Funding can offer a company a business credit line or term loan based on provided collaterals.
Friendly: Accel Business Funding will be able to provide many borrowers the funding that they need even if they have low credit history.