Asset Based Loans

Asset Based Loans generally place primary reliance on the collateral. These loans may often utilize a higher advance rate than a traditional bank loan which means you can often borrow more money using the same assets. Because asset based lenders focus on the collateral, they may be less concerned about the level of your current profitability or your amount of leverage. Some banks provide asset based loans, but generally non-bank lenders provide more aggressive terms to smaller middle market companies. Asset based loans may consist of revolving lines of credit or term loans secured by machinery and equipment. Unlike banks, they usually do not like real estate. Interest rates and fees are higher than bank loans, and interest rates are floating. Another potential negative is that because they are more focused on collateral, asset based lenders generally require more frequent and detailed reporting than other lenders.