Asset-based loans offer a practical solution by allowing companies to use their existing assets as collateral. This financing method helps businesses unlock the value tied up in their inventory, equipment, or accounts receivable without the conventional lending restrictions.
Asset-based lending represents a fundamental shift in how businesses can access capital. Unlike traditional financing that primarily evaluates cash flow and credit history, asset-based loans focus on the value of your business assets as the foundation for lending decisions.
The distinctive feature of asset-based lending lies in its evaluation approach. Rather than scrutinizing your company’s credit score or financial statements, lenders assess the quality and value of your assets. This focus on collateral enables loan-to-value ratios typically ranging from 70-90% of the asset’s worth, providing substantial financing capacity for businesses with strong asset portfolios.
The structure is notably flexible, with fewer financial covenants than traditional bank loans. This means you won’t face the same strict requirements about maintaining specific financial ratios or meeting rigid performance metrics that often accompany conventional financing.
Asset-based lending delivers several strategic advantages for today’s businesses:
The range of qualifying assets is broader than many business owners realize. Accounts receivable typically forms the foundation of most asset-based loans, with lenders particularly favoring current receivables less than 90 days old. Well-maintained inventory can serve as valuable collateral, provided it’s marketable and properly managed through a perpetual inventory system.
Machinery and equipment qualify when they’re operational and have clear market value. Even your company’s real estate holdings can strengthen your borrowing capacity. For optimal results, these assets must be regularly appraised and properly maintained to ensure their continued value as collateral.
Modern asset-based lending has evolved to sometimes include less traditional assets. Some lenders now consider intellectual property and brand value as part of a comprehensive lending package, though these typically complement rather than replace more traditional forms of collateral.
Globix can provide Asset Based Funding for any viable company globally up to 80% of Accounts Receivable (Aged under 90 days), 50% of Inventory, 70% – 80% of Equipment, Real Estate Equity Funding, for Corporate Acquisitions, Recapitalizations, and Growth Financing.
