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Asset-Based Loans
Asset-Based Loans are, as the name would imply, loans that are
based on the assets of your company. Traditionally,
asset-based loans are those secured by
your accounts (invoices) and by your inventory. In some cases
asset-based lenders will also use equipment as
collateral. Unlike factors who actually
purchase your accounts weekly, asset-based lenders
lend against your assets. Your business will therefore
need a certain level of established credit history, although typically
less than for a financial statement loan as provided by
most banks.
How Asset-Based Lending Works
Asset-based loans are typically utilized by
manufacturers and distributors that face problems of inventory
finance. Those operating in the service sector such as staffing
companies, guard services, landscaping companies generally are nor
eligible for asset-based loans until they reach a
relatively large size. Each week, your asset-based lender will
provide you with a lending certificate or "lending base" calculated on
the amount of your accounts receivable outstanding and on site
inventory. This lending base will be modified each week based on
your sales activity. Asset-based loans are often
termed "revolving lines of credit" and your business
will be responsible for weekly reports and occasional audits to insure
the integrity of the credit line. Asset-based lines
are typically much larger than factoring facilities with
$100,000 usually being the minimum and over $1,000,000 being the
norm..
You can find out more
about asset-based loans and their availability for your
particular company by requesting our informative publication,
"When Banks Say NO!...the Small Business Guide to
Factoring". Its FREE, courtesy of Tallahassee Factors
in the Contact Us
area of our web site.
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