What Are Asset-Based Loans?
Asset-based loans are generally offered by finance companies. They are provided on a revolving credit basis and secured against the assets of a company. Usually, accounts receivable and inventory are taken as collateral.
These types of loans are perfect for companies that are expanding rapidly or are undercapitalized. They can also be utilized for financing acquisitions. They work only in those cases where the company has a record of being able to turn over its inventory a number of times in a year and where the accounts receivable is proven.
Asset-based finance is offered by a huge number of funding companies as well as banks. However, the market is not so wide for small businesses who are looking for loans of $500,000 or lower. The majority of lenders prefer sanctioning loans of higher value as the cost of monitoring the loaned amount is the same, regardless of its value.
Asset-based …
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