Asset based lending is companies financing their businesses with collateralized loans. The concept of asset based lending is matching a companies assets to its borrowing needs. Global Capital Funding uses a client’s business assets as its primary basis for lending, in comparison to banks who rely heavily on balance sheets ratios and cash flow projections as loan criteria. The result is usually a far greater borrowing power than can be achieved from a traditional banking approach.  

The prospective borrowers do not have to be profitable or have a minimum net worth. A business with tangible assets and competent management can use its assets to create additional working funds to assist with carrying out its business plans.  

Asset based loans are backed by many types of collateral, which includes 1) Accounts Receivable, 2) Inventories, 3) Machinery and Equipment, 4) Real Estate, and 5) Certain Intangibles. Manufacturers, wholesalers, distributors, importers, retailers, service-oriented businesses and others can qualify for asset based lending.  

Asset based lending can be utilized in many situations. The primary use is to supplement working capital to finance the operations of a company and this can be as simple as meeting payroll or as complex as a leveraged buyout. The typical asset based loan is used to generate working capital to apply to vendor discounts. The following example illustrates how this works:    

Let's assume Company A has already secured an asset-based lending line of credit through Global Capital Funding Corporation with an advance rate on accounts receivable of 80% and a 50% advance rate on inventory. The rate charged for borrowing is 1% over prime (assuming prime equals 8%) or 9% annually.

Company A has $2,000,000 in qualified accounts receivable and $1,000,000 in qualified inventory.

Company A's principal vendors offer a discount of 2% per month or 24% annually.

Company A could borrow a total of $2,100,000 (80% of $2,000,000 and 50% of $1,000,000). If Company A was using $1,500,000 to meet other working capital requirements, then the amount available for vendor discounts would be $600,000.

Therefore, $600,000 multiplied by the annual discount of 24% equals $144,000. The cost of borrowing the $600,000 annually at 9% is $54,000.

Company A will now net $90,000 in additional profit from using asset-based financing through Global Capital Funding.  

This is one of many ways asset based lending can work by allowing more leverage on a balance sheet for companies. Therefore, because of asset based structure, companies can also add to their cash flow by taking more aggressive tax strategies such as expensing accruals to minimize income and also tax. In comparison, with most bank financing packages, GLOBAL CAPITAL FUNDING, is the low cost provider while maximizing borrowing capacity.    

BENEFITS & ADVANTAGES

Ø       Acquisition Financing
Ø       Bringing Financial Stability to Troubled Companies
Ø       Comprehensive Debt Restructuring
Ø       Refinancing of Bank Debt
Ø       Debtor in Possession Financing
Ø       Special Situations