Understanding the Value of Asset Based Lending

The Value of Asset Based Lending

Asset based lending from a trusted lending partner can provide stability during periods of transformation for middle-market businesses.

A Solution for Financing When Cash Flow is Uncertain

Volatility in the markets is affecting many businesses today, no matter how well they are managing their internal operations. Trade agreement and tariff uncertainties are adding to the concerns of companies today and resolutions do not seem right around the corner. More and more businesses need flexible financing options.

Cash-flow based financing may not be the best solution to meet the needs of a company that finds its earnings hard to predict or even predictably variable, whether because of uncertainty in world markets or the nature of its own business. A company may have a limited operating history, be in a transitional growth phase, have operations that are cyclical in nature, or be dependent on services or commodities with high potential for seasonal or short-term fluctuations.

In all these cases, asset-based financing can be a more accessible source of financing than traditional loans, which often use financial covenants that require a company’s earnings and related financial statement ratios to remain in certain ranges. Asset-based loans are not bound by these restrictions. Asset-based loans are commonly based on the value of a business’ accounts receivable, inventory, machinery and equipment, or a combination of these forms of collateral.

More Borrowing Capacity

Many businesses will find their collateral-driven borrowing capacity to be higher than traditional loan limits. An experienced asset based lending team is able to listen, take unique circumstances into account and be creative in proposing solutions. Customized analysis rather than rigid parameters often result in a better outcome for the borrower.

Experienced ABL lenders are able to perform “deep-dive” detailed analyses of a broad range of collateral options, enabling them to optimize valuations and advance rates — equaling greater liquidity — for businesses in transition.

Not only are asset-based loans typically easier for businesses in transition to get, they also can be quicker. The application and underwriting process is faster than qualifying for a conventional loan or line of credit, making access to funds quickly obtainable for qualifying companies.

Capital for a Broad Range of Operating and Non-Operating Uses

Asset-based financing can be structured as a revolving line of credit or term loan, depending on the needs of the borrower. These options make this type of financing appropriate for fast liquidity for immediate needs, long-term financing of major capital expenditures or a reliable resource supporting what-if planning.

In addition, there are few limitations on the uses to which asset-based financing can be put. Funds can be used to finance an acquisition or buyout, to refinance prior loans, for recapitalization or growth or smoothing out temporary sales fluctuations.

Safe Partner for Your Client

Capital fluctuations can cripple any business. Gibraltar is an asset-based financing partner that can offer flexible solutions when other sources are limited or too restrictive. We maintain strong relationships with our financial industry partners, and we know we’re successful when our clients can eventually transition back to traditional financing. Read about some of the 175 borrowers we’ve helped just since 2010, or contact us today about your clients’ needs.

Leave a Reply

Your email address will not be published. Required fields are marked *