What you should know about Asset Based Lending

Growing your business is a bit rough; most business owners will tell you that it’s tough obtaining commercial financing. I must say it’s true, in such tight economy and credit environment. The vital cog in the economy right now is the asset-based lending and it has increased exponentially.

Asset based lenders provide creative business financing solutions for companies that is having a hard time to qualify for traditional bank loans and credit lines. It also helps companies that have bank loans or lines of credit but needs additional short term working capital to take advantage of opportunities.

So if your business is growing rapidly, in the middle of a turnaround or undercapitalized then asset based financing is the ideal alternative for you. But remember this type of loan works only for companies with a strong accounts receivables and a demonstrated track record of turning over inventory several times per year. And such loans are often expensive than bank financing, as asset based lenders tends to have higher expenses than bankers do. Pricing among asset-based lenders is competitive, but interest rates can range from 12 percent up to 28 percent. The loan amounts tend to be $100,000 and up.