What Is Asset-Based Lending?
An asset-backed loan is secured by assets, or anything a company owns that has significant value. This includes hard assets like vehicles and land as well as paper assets like bonds and stocks. Some of the most common forms of collateral used for asset-based lending are inventory, accounts receivable, equipment, and other items found on a typical business balance sheet. Asset-based lending is also called commercial financing, or asset-based financing. This type of of credit is secured by the collateral assets so that the creditor has an alternate way to redeem the value of the loan if needed.
Asset-based lending is sometimes used for long-term funding needs but an asset-backed loan is frequently sought for working capital so that a business can meet daily cash needs or unexpected and sudden needs for financing. For example, if a particularly large order comes in and your company needs the capital to finance payment for receipt, this can be the perfect opportunity to seek an asset-backed loan from a lender you can trust to help you quickly manage the acquisition of your inventory.
Other uses for asset-based loans are to meet payroll or to build inventory for sudden spikes in orders. The funds generated through assets can also be used as capital for restructuring measures as well as acquisitions and buyouts. You can pledge these assets to a willing lender to raise capital for all sorts of financing needs, including payment for pending debts.
The interest rates in asset-based lending can be quite reasonable since the default risks are diminished by the backing of solid, highly-rated assets. Credit risks on an asset-backed loan are low when the supporting collateral backing the loan is highly valued.
Sometimes an asset-based financing company can give a business a revolving line of credit that is percentage-based. The percentage varies according to the asset classification. The business can then draw upon this line of credit when they need the funds and pay back the loans when they have surplus cash. Then they can draw from it once again. Percentage-based revolving credit lines can offer your business a critical base of security because you will have access to capital precisely at the time you need it.
Find out how we can help you fund your business dreams. Use the form above to contact Calvert Corporate Funding today; the application process is easy and quick to start, and our executives have decades of experience in helping applicants find the best possible solution for their funding needs.