What is the function of asset based loan?
Asset based loan financing provides short term restructuring of a companies financial situation to facilitate maximum cash flow. It provides a period of recovery time and a financial operating environment where a company can demonstrate how it could perform with a long-term loan in place. This allows a company to demonstrate it is worthy of long term financing. An asset based loan does this by allowing a company to pledge its assets as collateral for a loan. The company still owns its assets, but they can easily be seized if payment are not made to the financial institution issuing the loan. It is very important to make loan payments on time.
What are the advantages of asset based loan ?
When business opportunities appear in the market, access to conventional financing may not be executed in time to take advantage of the situation. There may also be the need to “stretch” the resources available to accomplish a companys’ objectives and conventional resources will not handle it. This is where an asset based loan becomes the mechanism of opportunity!
What does an asset based loan look like?
Qualifying assets include: real property, A/R, equipment, finished inventory, etc. Some loans are based on a specific asset, while others function as a line of credit secured across a combination of assets.