Types Of Asset Based Lending Programs
Receivables Finance
Receivables finance is typically the main component of an asset based loan and generates the most working capital. Lenders prefer accounts receivable over other assets because it is the easiest asset to convert to cash. In many cases lenders like to control the flow of cash by sharing a deposit account or lock box facility.
Inventory Finance
Inventory finance is an important component of asset based lending. Inventory finance increases a company’s working capital by funding a percentage of the total cost of inventory on hand. Advance rates are often fifty percent of the cost of goods, however, are ultimately decided by an appraisal.
Equipment Finance
Equipment finance is another component of an asset based loan and is available to companies that own capital equipment. Advance rates are typically less than advance rates generated by accounts receivable funding. While lenders prefer equipment that is bolted down, some will consider advances on rolling stock as well.
Real Estate Finance
Real estate finance is for companies that own the facilities they operate out of or hold real estate as an investment. While real estate is often used as additional collateral to secure asset based lending, it is also an asset that can be considered as part of an asset based loan. Advances rates on real estate are predicated on recent appraisal.
Intellectual Property Finance
Trademark funding or intellectual property funding is not as common as the other types of assets used to secure an asset based loan. Intellectual property can be considered as part of an asset based lending facility, however, only for companies that have a proven track history and recognizable brand that has value in itself.