Asset based lending
WHAT IS NEEDED TO START THE FUNDING PROCESS?
* Fill out “Apply for Funding Application” (Green Button -Look Below here)
* 6 Months of Bank Statements
* Most recent Business Tax Returns
* Previous Year & YTD Financials (P&L + Balance Sheet)
* Aging A/R + A/P Inventory Report w/ Numerical Values (if applicable)
* PO’s/Contracts/MSA’s PO= Purchase Orders MSA=Master Service Agreements
Cashbox offers Asset Based Lending to business as type of funding that are secured by assets used for collateral. The assets can be the company’s accounts receivable, inventory and types of equipment. To reduce the loan’s credit risk, asset-based lenders rely on the value of the underlying collateral.
The truth is, the Asset Based Lending industry serves businesses, not consumers.
At Cashbox, we are here to help out your business. By now, you should understand that Asset Based Lending is a type of business funding which is secured via the firm’s assets as collateral. This provides the firm with the right to use the available working capital in their assets that include the accounts receivables, inventory and equipment. The funding can be arranged as revolving credit facilities, allowing a firm to borrow money from its assets regularly to fund expenses or make investments. Asset-based funding is utilized by firms who require working capital to function or expansion, and in some cases, their bank line of credit has surpassed its maximum. Companies that use Asset Based Lending frequently have cash flow issues, which are often the result of rapid expansion. This demonstrates that expansion of business is good but at times, it can go sideways, this is why you should call Cashbox at (203)-CASH-BOX for immediate assistance. Lenders can facilitate such enterprises to structure their rapid growth issues and enable them in a promising position for future growth. This is where CASHBOX can help you.
How Does Asset Based Lending Work?
Businesses require loans or lines of credit to rely on their day to day cash flow needs. For instance, a company takes out a line of credit to assure that it can cover its costs even if the payments are delayed for a short duration.
In case, a company’s cash flow or cash assets are insufficient to cover a loan, the lender can offer to sanction the loan using the company’s physical assets as collateral. A new restaurant, for example, might be able to get a loan based on its equipment as collateral.
The prerequisites of Asset Based loan vary on the type and value of assets presented as security. In most cases, lenders favor liquid collateral, such as securities, that can be readily converted into cash if the borrower defaults on payments. On the other hand, physical asset loans are risky; therefore, the maximum loan will be significantly less than the assets’ book value. While interest rates are determined on three factors:
the applicant’s credit history;
cash flow and
duration of business.
When borrow needs an advance, they request additional working capital, and the funds are transferred directly to the borrower’s bank account. The borrower has the choice of requesting as little or as much financing as they need at a particular time. This grant for greater control over the amount of capital borrowed, reducing the finance costs. These fresh assets become available for inclusion in the borrowing base as the borrower manufactures or purchases new inventory and generates receivables from sales. The line of credit is subsequently paid down over time as inventory and outstanding receivables are collected.
However, most applicants received at Cashbox comprises small companies which are stable, having physical assets of value. These are the common asset-based borrowers here. Occasionally, we even come across large enterprises that may seek asset-based loans to fund their short term needs.
Advantages for the Borrowers
Asset-based loans are easy and quick to receive as compared to unsecured loans.
These loans consist of few settlements.
Lower interest rate to other funding services.
Advantages for the Borrowers
These loans can be risky, as it is collateralised with an asset.
If the borrower is unable to return the loan, the lender has the right to seize the assets used to secure the loan and liquidate them to pay off the debt.
Asset Based Lending vs Bank Loans
The prime difference between Asset Based Lending and the typical bank lending is the criteria used by the lender when approving a loan. A traditional lender will consider cash flow first, then collateral. While asset-based lender prioritises collateral. Traditional lenders often need fewer collateral requirements but more financial covenant, as cash flow is their main source of repayment.
Most businesses prefer asset-based loans to a bank loan, even if they can receive a bank loan. The reasons are:
Asset based lending require less collateral as compared to a bank loan.
Asset based lending are exempt from regular bank regulatory scrutiny. We don’t have a board of directors that meets every month to examine your account and determine if you no longer meet the lending criteria.
Asset based lending provide you with the flexibility to manage your cash flow the way you want. Unlike typical bank loans, where you receive a lump sum at closing and make a fixed monthly payment based on the original loan amount, you only pay for the amount you use.
If you still have queries and cannot make the right choice, you can contact us. We at Cashbox are here to guide you in making the right decision.
The Arduous Call, is Asset Based Lending the Right Choice for your Business?
Before going for an asset based loan as working capital for your business, you need to ask yourself these questions:
Do you have any accounts receivable, equipment, or inventory that could be utilised as collateral for a credit line?
Do you require additional working cash in addition to what you presently have?
Is your business expanding?
Do you want a line of credit that is tailored to your needs and allows your company to expand?
If your answer is “yes”, we at Cashbox are dedicated to assisting you in your business. This is the right choice for your company. What are you waiting for?
