What is Asset-Based Lending?
Asset-based lending is a type of lending that is exclusive to businesses, not consumers. The business borrows money from a lender and uses its own assets as collateral to secure the loan. This means that if the business (borrower) defaults on the loan and stops making payments, the lender can seize those assets to pay the remaining balance of the loan.
What Type of Assets Can Be Used in an Asset-Based Loan?
The assets that can be used as collateral in asset-based lending can be equipment, inventory, accounts receivable, or private property. The preferred collaterals that lenders like to see are cash or those that can quickly be converted to cash, which is known as liquidating. Other types of collateral that can be liquidated easily include CDs, stocks, bonds, and treasury debt.
There are other assets that can be used as collateral that are not quite as easy to liquidate. Examples include private property such as vehicles, homes, and property in addition to assets within the business including equipment, vehicles, buildings, inventory, and furniture. When these types of assets are liquidated, they usually don’t generate the value that they are actually worth.
Other types of collateral are accounts receivable, future earnings, and invoices, and these types are even more difficult to liquidate than the assets previously discussed.
How Much Collateral Do You Need for an Asset-Based Business Loan?
Whatever amount is involved in an asset-based loan is at the very least equal to the value of the assets. In the most basic example, if someone can only offer as collateral the $75,000 that is sitting in their savings account, the maximum amount of money they can borrow would be $75,000.
How Does an Asset-Based Loan Work?
In the example above, that would be a loan-to-value ratio of 100%. A loan ratio might be 80% where the loan is only for 80% of the value of the collateral. The loan-to-value ratio can be different depending on what type of collateral is being offered. Automobiles would command a different ratio than the borrower’s own home.
Affinity Beyond Capital (ABC) Can Use Asset-Based Lending to Fund Your Business’s Needs
Businesses often need to acquire new equipment or expand in order to continue or grow operations within the business. They might need heavy machinery, manufacturing or printing equipment, new computer technology, kitchen equipment, or any other types of equipment needed to operate a business.
Whatever your business needs, ABC’s team of experts will be there to work for you and help your business grow. Our asset-based lending program is a financing option available to a variety of businesses and is an alternative to the traditional bank loans that are typically designed for most small businesses. Our flexible terms will allow you and your business to receive the capital it needs to grow.
Affinity offers funding up to $25 million with flexible terms of 3 – 24 months to help you with construction, equipment, expansion, or any size project within your business that requires capital. Our experienced professionals have worked closely with all types of businesses in a wide range of industries, and we will tailor a customized financing solution for your business.
How ABC’s Asset-Based Lending Program Works
The lending experts at Affinity Beyond Capital will work with your company to target which assets you should use to secure your loan and what the terms will be. Our highly trained and experienced team understands businesses and the challenges they face and that your business doesn’t have time to wait on receiving much-needed capital. Therefore, once we identify the assets to be used, we will determine their value and how much of an advance your business will receive. This amount can then be issued in a lump sum loan or as a line of credit. ABC offers competitive rates and flexible terms to quickly satisfy the needs of your business.
Reasons Why Your Business Might Need Funding Quickly
- Delinquent clients causing a problem with cash flow to your business
- An opportunity to make substantial profits quickly
- Need for quick inventory to satisfy orders
- Equipment purchase or replacing
- Repairs or updating
How quickly can ABC provide funding?
When your business needs funding quickly, Affinity Beyond Capital is your best choice for a trustworthy lender that will make the loan happen quickly. Other traditional banks can take months before you see any funding, or they may decide not to lend to you at all. However, ABC has the flexibility to provide you with funding in as quickly as one day.
You can complete our online application or call our lending specialists at 833-234-4689, and our experts will guide you through the loan process that will provide you with the funds your growing business needs.