Asset Based Loans



Overview:

  • Compliments an invoice discounting facility.
  • Alternative to traditional bank financing as based on assets.
  • Similar to bank term loan.
  • Recent distress/turnaround.
  • Security based on A/R, inventory, equipment and machinery.



Why:

  • Quick turnaround.
  • Factoring without notification.
  • Finance MBOs/LBOs, acquisitions … other unique opportunities.



Process:

  • If currently a factoring client or wish to factor in conjunction with an ABL, complete the Evaluation form.
  • Submit:
    • Most recent interim financial statements
    • Current A/R and A/P aging reports
    • Schedule of equipment, inventory etc
  • Upon an expression of interest then further info will be requested ie Articles of incorporation.



FAQs:

  • What are the advantages of an ABL?
    • May factor your receivables without notifying your customers
    • Greater flexibility and fewer covenants
    • Asset-based lenders are more comfortable leveraging at a higher level
  • Were not Asset based loans at one time viewed as loans of last resort?
    • Yes, some time ago. ABLs are flexible, versatile and priced competitively. Many financially strong companies use as much leverage as possible to grow their business. ABLs are used by big and small, old and new firms.
  • What is an ABL based on?
    • Asset collateral i.e. A/R, equipment, machinery, inventory etc
  • How is the loan advance amount calculated?
    • 65-85% of A/R plus up to 60% of inventory, equipment.
  • Are ABLs more expensive than unsecured loans?
    • ABLs are priced as per the credit risk involved. The market is coming to realize that unsecured loans should have a higher premium than loans based on assets.
  • What is the cost of an Asset Based Loan (ABL)?
    • Between 5-10 pts above prime
  • What are the reporting requirements?
    • It is key for the lender to stay on top of the current value of the loan’s supporting collate. Borrowers are required to report on a regular basis as established and set out in the loan agreement