Asset Based Lending
Asset Based Lending is a form of funding which acts by generating finance against existing assets and equipment in your company. This allows you to raise funds secured on assets that your business already owns. The key benefit of Asset based lending lies in its flexibility when compared with a bank overdraft.
Asset based loans are becoming increasingly more popular with both small businesses and larger companies and in the second half of 2008 alone asset based lending agreements worth £1.5bn were out in place. According to surveys of accountants in the UK they report that over 50% of their clients were now actively considering these forms of asset financing versus very low percentages in the past due to the general tightening of credit availability in the UK in the last couple of years.
Asset based lending takes a traditional invoice finance facility which you would probably more usually recognise as invoice discounting or factoring which is secured on debtors only, and extends this to allow companies to borrow against all of their other qualifying business assets and equipment.
Investing in plant, machinery and other equipment is essential for most companies in order to compete effectively in the marketplace and grow revenues and profitability. However this can prove a drain on your cash reserves so it is worth considering asset based lending in one form or another to meet your ongoing funding requirements. When assessing asset based lending the finance providers consider two crucial factors, namely the useful working life of the fixed asset and an external valuation of the asset.