FAQ
What is asset-based lending?
An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Asset-based lending is any kind of lending secured by an asset (also called collateral). In other words, if the loan is not repaid, the asset or collateral is taken in payment for the loan.
Additional information: “What is Asset-Based Lending?”
What qualifies for an asset?
An asset might be something like inventory, real estate, equipment, buildings, accounts receivable, or a mix of these items. An asset might also be intellectual property, trademarks, or patents.
Additional information: “How Does Asset-Based Lending Work?”
How are assets valued?
Asset valuation is how the worth of a particular item, portfolio, or company is determined. There are many techniques that can be used to determine value. Some of these valuation techniques are subjective and others are objective. For example, an analyst valuing a company may look at the company’s management, which is more of a subjective valuation. As the analyst considers the composition of a businesses capital structure and the prospect of future earnings they will use more objective techniques.
Why would someone want an asset-based loan?
Although banks do handle these kinds of loans, asset-based lending is typically done when traditional bank funding is not possible. This is often an excellent option for a quickly growing but cash-strapped company to meet its own short-term needs for ready cash, for example, or for a borrower who may not have excellent credit, an income to support the loan payments, or cash for a down payment on the item they are seeking to purchase.
Additional information: “3 Things to Consider When Seeking an Asset-Based Loan”
What is the advantage of an asset-based loan?
The primary advantage of an asset-based loan is that smaller companies can usually get cash more quickly than they could from a traditional loan.
Additional information: “What Are the Advantages of Asset-Based Loans?”
Is an asset-based loan hard to get?
Asset-based lending is often easier to obtain than a traditional loan for borrowers who don’t fall within the typical lending standards.
Additional information: “Does My Company Need to be Profitable to Use Asset-Backed Lending?”
Why haven’t I heard about asset-based loans before now?
Business owners often shy away from non-bank financing because they don’t understand it. And bankers may have very limited experience outside of mainstream or traditional options. Asset-based lending has been on the rise recently as the difficult credit environment has forced business owners to look for non-bank financing options to support a cash infusion, to beef up working capital or to help facilitate growth.
