Understanding the ins and outs of bank lending can often be difficult. Discover what you need to know about asset-based lending, an often-overlooked source of finance.
In contrast to traditional loan capital, asset-based lending provides funding against the value of the multiple assets within your business, including stock plant & machinery and property. Obtaining this type of loan can be quicker than traditional lending and also relatively simple and straightforward.
The process begins by determining how much loan capital you want to secure and which assets you want to offer to form the collateral. Once this has been done, the lender can then initiate the task of valuing the assets. Following this valuation, an official offer of finance is issued, providing full details of the loan amount (usually 60-90% of the asset value), arrangement fee and terms & conditions.
Once the offer has been accepted, funds can be transferred relatively quickly – often within 24 hours. The amount of the arrangement fee and the monthly cost will depend on how much is being borrowed together with the amount and type of collateral.
During the timescale of the loan repayment, the assets are under the ownership of the lender. The assets are released as collateral as soon as the loan has been repaid. If for whatever reason you are unable to repay the loan, the lender will arrange to recover the outstanding balance through the sale of the asset. Then, together with any recovery costs, the loan account will be cleared, and any remaining proceeds will be paid back to the borrower.
For a more in-depth overview of asset-based lending, download the guide below: