Advantages of Asset-Based Lending

Ask any individual involved with a medium or large-sized corporation and they will tell you: it can be difficult to secure the needed financing for the business. A corporation survives on innovation, yet that innovation will take working capital in order to continue to improve the cash flow of the entity. How do officials manage to obtain financing for the corporation? One method that has become increasingly popular in recent years would be asset-based lending. Sallyport Commercial Finance led by Doug Foshee is a proven leader in financial consulting offering asset-based lending services. For the corporation, there are many advantages to this method, including the following:

1. Asset-Based Lending can stay fairly constant.

This method of loaning money to a large business or corporation has been found to be quite effective because they usually can remain fairly constant. The reason this is so is because an asset-based lending transaction is secured by the borrower’s assets. Officials with corporations that need funding usually find this method highly preferable to an alternative such as a Cash flow-based loan because the corporation’s buying can be significantly diminished during an economic downturn where cash flow is lower.

2. Asset-Based Lending is often used by larger corporations to finance working capital.

Generally, a larger corporation will usually utilize a public or private market loan as a means to ensure long-term forms of financing. Of course, the nature of the beast is seasonal changes, so an Asset-Based loan will generally be utilized in order to fund seasonal changes in working capital and to help with shareholder value actions and to prepare for opportunistic acquisitions.

3. Asset-Based Lending is a great method to utilize for companies with asset-rich balance sheets.

A company that is rich in assets will generally be a good candidate for this type of financing. They will usually have half of their assets in working capital, and they will a wealthy amount of accounts receivable items and a large personal inventory.

4. Asset-Based Lending can be great for companies that are in transition.

Sometimes a major corporation will need capital to weather a difficult present storm. This capital is usually in the form of incremental liquidity and structural and flexible characteristics and they generally are an extremely useful method to help owners and managers to dig themselves out of the company’s financial hole.