Asset-Based Financing

asset basedMany companies in need of capital use a system of secured asset financing to develop cash flow. Typical needs are for expansion and construction of facilities, new equipment or machinery purchases, rehabilitation, or modernization of an existing facility.

What is asset-based financing?

It is a simple form of extending a cash advance based on the worth of a company’s accounts receivable, raw materials such as precious metal inventories, operating machinery and equipment, inventories, and sometimes real property.

Why use asset-based financing?

Lending money secured by assets is not new or unique. Commercial asset-based lending has a long history. Asset-based lending programs are designed to help companies grow in dynamic ways. They are one of the most flexible forms of financial opportunity for a client and generally provide more cash than bank lending.

Companies with an asset base may not have the opportunity to grow because traditional banks encourage borrowers not to outgrow their capital base. In other words, banks do not allow companies to operate beyond their shareholder equity.

The traditional bank approach to lending is by assessing balance sheet ratios and earnings histories. Bank funding loans are traditionally funded through bank deposits that include savings accounts, which are regulated and insured by the Federal government through the FDIC.

With the aggressive competition for clients today, asset-based lenders are becoming very creative, are in direct competition with traditional banks, and offer the same level of interest with few covenants.

How does asset-based financing work?

Asset based lending usually groups all of the client’s assets and structures the financing according to the worth of the assets. The financing is considered a “floating lien” as defined by the Uniform Commercial Code (UCC). The larger the asset-based financing deal, the greater the amount of paperwork needed. However, in all asset-based lending deals, the quality of the collateral is the primary factor in determining the creditworthiness of the client.

At ProActive Capital Funding, we will help you find the best funder for your needs and guide you through the entire process of securing the financing.

For additional information, contact:

Ray King <> The ProCoach
Phone: 832-615-9124 * Fax: 832-615-9570