Asset-Based Financing for Small Businesses is a type of “Secured Loan” that involves obtaining Funding by leveraging the value of the Company’s Assets. Instead of relying solely on the Business’s Creditworthiness, this type of Financing is secured by the Assets owned by the Business, such as Inventory, Equipment, or Real Estate. Small Businesses can use these Assets as collateral to secure a Loan. With Asset-Based Financing, the actual borrowing capacity is determined based on the value of these actual Assets.
Asset-Based Financing is particularly beneficial for Small Businesses with valuable Assets but limited access to traditional forms of Financing. It provides a way for them to secure funding and improve their Cash Flow without necessarily relying on a strong credit history.
HOW DOES IT WORK?
FUNDING AMOUNT AND TERMS:
Approval Amount Rule of Thumb: Maximum Funding Up to 80% Property Value Minus Debt on Property (Ex: $500k Property Value x 80% = $400k Minus debt of $200k = $200k Maximum Loan Amount) Of course – it can be higher or lower depending on business situation
• Indicative Terms: 7.5%-8.5% On average
• Up to 5 Year Balloon
• Up to 30 Year Amortized
• Monthly Payments
ASSET BASED LENDING HIGHLIGHTS:
GENERAL GUIDELINES:
• Assets Must Be Commercial and or Developable Land
• Land Equity Must Be 1,000,000+ Value
• Commercial Property Must Be $125,000+ Value
• (No residential Properties Allowed or Residential Rental Properties allowed)
• Minimum Equity Amount In Property: Equity amount must exceed 20%.
• Must have Business Checking Account (*Must be in name of the Business, not a Personal Account used for business)
• 2+ Years in Business
• $75,000+ Monthly Sales
• Owner has 600+ FICO Score