It is a predominant need for almost every business to rely upon borrowed finances to sustain or scale their operations. These needs are settled using short-term financing. This is very beneficial for small businesses as their financial downturn can be handled efficiently, resulting in growth in the longer phase.
Among many available financing solutions, asset-based loans have become the most popular because of their lending style. Almost every business having any business needs can secure their collateral and get capital against it.
What is an ABL?
ABL is the process of fund allocation that is concerned about the liquidation value of the assets of a company as per its balance sheets. The loan amount is granted based on that value. Some most common forms of assets like real estate, property, machinery and equipment, company inventory or accounts receivables can be used as collateral for the loan. This is the best form of financing for companies that have maintained a very strong balance sheet and need the finances to grow.
What are the features of ABLs?
- Focus- The focus that the lenders have on asset-based lending is very much different from the rest of the financial solutions. While other firms focus upon the projected cash flows of the businesses in the future, asset-based lending focuses on the assets that are present in the balance sheet of the business.
- Collateral- This is the biggest differentiating factor between the ABLs and other sources of financial loans. Businesses only get approved of the ABLs depending upon the current assets that the companies hold. These are taken as collateral by the lenders. This is because the lenders can utilise these collaterals in the future in cases when there is a loan default happening. The lenders possess the assets and use them to retrieve their payments and the borrower does not have any further right upon it.
- Suitability- With every business differing in its operations, the loans need to be tailored according to their specific requirements. Depending upon the asset list on the balance sheet and the requirement of capital, ABLs are granted.
- Criterion- Since the requirements vary, the criteria to qualify for the loans also differ. ABLs can be easily achieved when the business has a perfect balance sheet, business plan, credit history and expansion planning.
Accord Financial asset-based loans are very flexible financing options that have very relaxed criteria to meet with minimal documentation.