What does Asset based lending mean?
Asset based lending (also known as “commercial finance” or “asset-based financing”.) is a business loan secured by collateral (assets). The loan, or line of credit, is secured by inventory, accounts receivable and/or other balance-sheet assets. Often, the funding source will send out a field examiner to perform an analysis of your business, prior to you getting approved for a loan.
This loan is used to meet your business cash flow needs such as, meeting payroll or building inventory. If the borrower does default on their loan, the lender has the option to seize their assets in an attempt to recover their lending costs. Thus making this loan’s interest rate significantly lower.
What is a field examination?
Field examinations include an inspection of a borrower’s books and records and an evaluation of working capital accounts focused primarily on assets used as collateral for a secured lending facility. A field examination includes detailed analysis, testing for authenticity and preparation of a borrowing base report. Examinations are also perfect for any borrower who may be experiencing financial or operational difficulties.
Alternatives to Field Examination
- BORROWER’S QUALITY ASSESSMENT (BQA) – For lenders seeking a hybrid product between a Businessman’s review and Field examination, we offer a Borrower’s Quality Assessment. Our professional will meet with management, review financial statements and projections and perform limited authenticity testing of collateral and underlying financial records. For a borrower who provides reviewed, complied or internally prepared financial statements, this assessment upgrades the quality of information to support sound credit decisions.
- BUSINESSMAN’S REVIEW (BMR)- Our professional will meet with a borrower’s management team to discuss each functional area of the business including sales and marketing, operations,
finance, organizational structure, and if appropriate, inventory control. This review is used when a lender needs to improve or confirm their understanding of a borrower’s business.
- QUALITY OF EARNINGS REVIEWS- For lenders to rely on operating cash flow and EBITDA figures, they must have a thorough understanding of their customers accounting procedures as well as their method for documenting changes in revenues, expenses, and balance sheet accounts. We provide quality of earnings review services to lenders who offer products ranging from fully secured and cash flow term loans to subordinated loans and equity investments. Our team of professionals asks the difficult questions to gain an understanding of the borrower’s accounting processes and test the strength of their balance sheet and quality of earnings.