For many businesses, traditional lines of credit may prove too restrictive while factoring and other alternative financing products may feel too cumbersome. Asset based lines of credit are a useful tool for businesses that are interested in tapping into value locked in certain assets the business is carrying on its balance sheet.
Lenders underwrite Asset Based Loans by advancing capital against near-term assets like accounts receivable, inventory, and equipment. This differs from traditional lines of credit that are either based on the cash flow of the business or secured by more illiquid assets like real estate. Given the liquid, ever-changing value of the assets securing the line, Asset Based Lending requires lenders to develop specialized capabilities in underwriting and monitoring these lines.
Fortunately for borrowers, many traditional banks have developed Asset Based Loan products that allow them to lend to qualifying customers more affordably and efficiently than ever, so think about contacting your current lender before seeking out alternatives.