Asset Based Lending - Learning the Key Advantages

This fast growing method of funding assists businesses in using their assets to solve the problem of a cash flow shortage. Companies that are expanding and therefore in urgent need of available currency have made asset based lending what it is today.

The Many Fold Benefits of Asset Based Lending

Asset based lending gives numerous advantages to businesses of all sizes. Compared to the traditional loan system, asset based lending gives faster access to decently sized amounts of ready cash. Most asset-based lenders and factoring agencies will also offer their clients valuable services, such as invoicing, accounts-receivable processing and collection services. As is common knowledge, if you can properly manage your accounts receivable portfolio, it will help expedite your cash flow and support corporate cash needs, which will help increase your working capital. The result of this is fewer outstanding account balances, which helps avoid bad-debt write-offs and enhances over all profitability.

Similarly, invoice factoring gives you working capital which will improve your business credit. Thus you can turn your accounts receivable line into a strong, predictably even source of working capital. Asset based lenders have branched into many different areas to help their business clients, offering not just credit facilities but also help with invoice purchasing, accounts receivable management, collection services, letters of credit, accounts receivable management and international trade services.

A prospective borrower dos not necessarily have to have a profitable enterprise or a minimum net worth in many situations. A commercial venture with tangible assets and a good qualified management teem can use those assets to create extra capital so they can execute business plans for future expansion. Types of collateral permitted are inventories, including marketable raw materials, machinery and equipment, accounts receivable, owner-occupied real estate and personal assets, as well as certain intangibles.

One of the many boons of asset-based lending is that small companies can not only get more cash, but that it can be received, and therefore put into action, much more quickly than would come from a traditional bank. Other key benefits include the fact that asset based lending is a non bank lending system. It does not limit company growth but instead encourages the purchase of capital equipment. It is more flexible, provides higher advances against collateral, and does not require any additional security, such as warrants against subsidiary stock or the owner's personal assets.

It is currently widely available the world over, providing flexibility without geographical boundaries. In point of fact, asset based lending helps push activities along, such as capital equipment purchases, reorganizations and debt restructures, mergers and acquisitions, turnarounds, debtor-in-possession loans, seasonal cash shortfalls, amongst others.

Of course, everyone should understand the legal aspects of asset based lending. Asset based lenders carry a certain amount of liability in these agreements, the breach of which, in the past, has lead to quite a few borrower plaintiffs earning legal awards that go well into the millions of dollars. Over the years, the client borrowers have used their right to sue the asset based lenders for the transactional losses they have incurred. This gives a deep sense of a serious safety net to a prospective borrower in asset based lending.