Power Growth with the Assets You Already Own

Asset-based loans can be a much-needed source of capital for companies that are rapidly growing, in need of additional funds during seasonal periods, or undercapitalized. Raising money for your business can be a cumbersome, time-consuming process—and you might not have time to waste! And, investors or lenders may require equity or royalties when providing funds to support your business. Simply put, with an asset-based lending loan, your business remains your business.

With asset-based lending, you can power your business with flexible funding secured by using existing business assets such as inventory, machinery and equipment, and/ or real estate. These loans often have lower interest rates, which means you are more likely to save money over time.

Asset-Based Lending (ABL) and Traditional Lending are two distinct forms of financing that differ in their underlying principles and structures. Here are the key differences between the two:

Asset-Based Lending (ABL):

1. Collateral: ABL is secured by specific assets owned by the borrower, such as accounts receivable, inventory, equipment, or real estate. The lender evaluates and monitors the value and quality of these assets, which serve as collateral for the loan.

    

2. Focus on Asset Value: ABL places significant emphasis on the value and liquidity of the borrower’s assets. The credit limit or loan amount is determined based on a percentage of the appraised value of the eligible assets.

    

3. Borrowing Availability: ABL provides a revolving line of credit, allowing the borrower to borrow and repay funds within the established credit limit as needed. It offers flexibility in accessing working capital based on the value of the eligible assets.

Traditional Lending:

1. Creditworthiness: Traditional lending primarily evaluates the borrower’s creditworthiness, financial history, and ability to repay the loan. It relies on factors such as the borrower’s credit score, income, business history, and financial statements.

2. Fixed Loan Amount: Traditional loans provide a fixed loan amount disbursed upfront. The loan is typically repaid over a predetermined period with fixed monthly installments.

3. Collateral and Personal Guarantee: Traditional loans may require collateral, such as real estate or equipment, depending on the loan amount and terms. Additionally, personal guarantees from business owners or directors may be necessary to secure the loan.

Overall, the key distinction between ABL and Traditional Lending lies in their approach to collateral and the primary factors considered for loan approval. ABL focuses on the value and liquidity of specific assets, while Traditional Lending emphasizes the borrower’s creditworthiness and financial history. ABL offers more flexibility in borrowing against assets, whereas Traditional Lending provides a fixed loan amount based on creditworthiness and repayment ability.