Asset Based Lending Versus Bank Financing
There is no secret that banks prefer to lend on stationary tangible hard assets, inventory and receivables are also considered as part of the borrowing base but at a low advance rate. Commerce Commercial Credit can offer higher advance rates due to our experience in receivable and inventory valuation criteria.
In the event where the client already has a bank line of credit, an Inter-creditor agreement is made between the bank and Commerce Commercial Credit where the receivables are assigned to Commerce Commercial Credit and therefore allows the client to borrow at higher advance rates.
Financing Receivables a Simple Process!
- Flexible Pricing options
- No invoice minimums -No facility fees
- No audits
- No up-front fees
- No hidden fees Set up account in 5 working days
- 24 hr funding thereafter Receivable credit lines starting at $250,000 & up to $10 million Customer referrals upon your request We Make Same Day Decisions Start Today
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- A two page application
- An accounts receivable aging report
- A customer list with credit limit request
- Copy of articles of Incorporation or DBA filing
- Purchase orders or rate confirmation agreements
- Invoices to factor
- Larger credit facilities may require more documents
A business seeking this type of funding usually has plenty of receivables and equal value in inventory. Commerce Commercial Credit performs an evaluation of the applicant’s assets to determine the approved amount of revolving funding. A common approved advance amount on the borrower’s accounts receivable collateral is 85% to 95%. Often at least 25% to 50% of inventory value will be approved as a revolving loan amount. Companies may need such revolving lines of credit for many different purposes, including purchasing new inventory, restocking current inventory, and meeting payroll demands.
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Acceptable collateral for most asset-based lines of credit include accounts receivable, inventory, business equipment, and factory machinery. Appropriate inventory may be both finished goods and marketable raw products. In some instances, certain personal assets of business owners may be requested as collateral. Accounts receivable. – This is the most popular type of collateral among asset-based lenders, due partly to the liquidity aspect of these accounts. Also, this form of collateral has a pre-set value.
Inventory takes second place to accounts receivable on the list of collateral most favored by asset-based lenders. This is mainly because inventory lacks the stabilized value and liquidity of accounts receivable. It is necessary for inventory to be sold in exchange for cash to establish value. In addition, inventory aspects like LIFO and FIFO make value assessments difficult.
Although they are often acceptable collateral for asset-based lending approval, manufacturing machinery and business equipment are usually more helpful for obtaining a term loan. Their worth as collateral is longer lasting and equal to the duration of their useful operation. Currently, trademarks and customer lists also can be used as collateral for some ABLs. Since both accounts receivable and inventory are renewed throughout the year at periodic intervals, they are in the favored classification of eligible collateral.
Asset based financing is a great solution for businesses with needs outside the realm of traditional funding sources. Whether it is for more cash flexibility or leverage to make purchases, Commerce Commercial Credit, Inc. can customize a lending structure that meets the needs of your company. Through a line of credit, we will provide the financial resources you need. We accept marketable raw materials and finished goods to satisfy collateral requirements.
Acceptable Collateral for an Asset Based Loan
Acceptable business collateral for an asset based line of credit includes inventory, business equipment, machinery and accounts receivable. Newer invoices are generally considered on a loan-to-value ratio of approximately 70 to 90 percent of the face value.
Accounts receivable is a popular type of collateral for lenders because of their liquidity. We also consider receivable invoices because there is a pre-set value. Inventory that can qualify is second to accounts receivable.
Typically, inventory does not have a stabilized value or the liquidity that comes with accounts receivable. Inventory has to be sold in exchange for cash before we can establish a value.
Machinery and equipment are usually acceptable collateral when we consider approving an asset based loan. However, these business assets are better for obtaining a term loan. Some asset based financing can occur with customer lists and trademarks.
Whatever you decide to use as collateral for the loan, you can continue to use and benefit from the assets. Our loan programs are designed for businesses that need short-term financing when traditional financing options are either undesirable or unattainable. Even if your business appears to be an ideal candidate for bank loans, consider how much more you can receive from Commerce Commercial Credit’s flexible borrowing options.
A bank loan requires that you add more debt to your balance sheet. Monthly obligations for loan payments can tie up cash that is better spent on capital growth expenditures. With an asset based loan from Commerce Commercial, you never incur more debt. Instead, you can use existing business assets to get the money you need. This is not money you have to pay back – it is money that you can use right now, for any business expense.
We never look at your business credit history to determine eligibility or loan amount. Unlike qualifying for a bank loan, your business’s financial history is not a consideration for approval. The amount of money that you qualify for is largely dependent on the value of the assets used to secure funding.
Asset Based Financing is a Flexible Way to Finance
Asset based financing is a flexible, cost-effective way to obtain working capital for your business. Unlike other structured financial products, you never give up equity that is in your company. You have a fast and easy method to grow, recapitalize, fund payroll and take advantage of supplier discounts. The amount you receive can increase or decrease based on your business needs.
Some of the highlights of our asset based lending program include:
- Primary facility size between $3 and $10 million
- Revolving line of credit
- Up to 90% in advances on eligible inventory
- Credit review services for existing and potential customers
- Quick response time
When businesses find themselves in a short-term cash flow deficit, they turn to Commerce Commercial Credit for financing to meet their needs. This is the ideal method of funding for cash-strapped, rapidly growing businesses. Why should you endure the unpleasant experience of waiting two weeks to be denied by a bank when you can get the cash you need from us within 24 hours? We use your business assets to alleviate your cash flow shortages with monetary advances.
Why Should You Use Asset Based Financing from Commerce Commercial?
There are several satisfying answers to why you should use Commerce Commercial Credit for your asset based financing needs. Often, you have faster access to great amounts of cash to cover regular business expenses. Our asset based lending program secures a line of credit or working capital loan with your accounts receivable to help improve your company’s efficiency. You can also use our funding solution for:
- Expansion projects
- Leveraged buy-outs
- Debt restructuring
Remaining competitive is essential to having a viable business in the market. Having the resources strengthens your position to maintain growth levels of your customer base. Additionally, customers expect product quality along with reliable customer service.
While satisfying your customers, you also want to maintain the latest innovations that can make your business the best in your respective industry. Whether you are a manufacturer, service provider, distributor or transport operator, Commerce Commercial Credit has the financing base to help you have a successful future.
Depend on Commerce Commercial Credit’s Asset Based Lending Program for Continued Success
Financial resources within your company can mean the difference between significant setbacks and continued success. With asset based financing from our company, you can remain resourceful and competitive throughout the ebbs and flows of the business cycle. If your business is facing some troubled times, our financial services can help you reorganize and restructure your business. We help you remain competitive with solutions that are tailored to your business requirements.
Why Asset Based Lending is a Good Choice
There are many financial resources vying for your business. Understanding that it takes money to make money, many are willing to lend you money. However, they are also willing to add on restrictive terms that benefit them instead of your business. Here are several things to consider when weighing the benefits of asset based lending with other traditional forms of business financing.
Expand and Increase Profits at the Same Time
Are you turning down new sales opportunities because there is not enough cash flow to cover the expenses? Commerce Commercial Credit offers a revolving line of credit through our asset based lending program to give you the additional working capital you need. Fuel your sales growth and never constrain your own success.
Rebalance Working Capital
It is a bad idea to use financial instruments to borrow long-term when you have a short-term working capital need. Fully-amortizing term loans are designed for financing longer term asset purchases such as real estate. Assets in the short-term category such as accounts receivable are best for short-term financing. An asset based credit line can help you get back in financial balance with the right resource.
Never Use Personal Assets as Collateral
Unlike traditional banks that usually require personal guarantees for a loan, Commerce Commercial Credit will never expect you to use your house, personal credit or other personal assets to fund your business. We have enough confidence in the viability of your business, its creditworthy customers and your long-term success and will use your business assets to cover your loan.
Manage Customer Credit for Free
Do you know the signs of a company that is on the verge of bankruptcy? Have you ever entered a contract with a customer, delivered the goods and later found out the company closed down – before you could collect on the invoice? Are you really confident that a prospective customer is not a credit risk?
In addition to partnering with you to resolve cash flow issues, we also work to protect you from deadbeat customers. Major credit reporting agencies can cost thousands of dollars each year to monitor customer risk. With Commerce Commercial Credit, managing your current and potential customers’ credit is just one more service we offer at no cost to you.
As a customer of Commerce Commercial Credit, you have access to credit expertise. We will investigate the credit worthiness of prospects and give you peace of mind knowing that your credit exposure will not interrupt your business operations.
Asset Based Financing is the Lender of First Resort for Many Businesses
Traditional banks have had a long history of financing businesses. Usually, there were no other options if a company could not qualify for a bank loan. Now, more businesses are turning to asset based financing instead of banks to avoid the standard restrictions that could hurt – rather than help – their business.
Banks can take a long time to approve your business loan application. If you do not meet their requirements, you have just wasted valuable time to be turned down. With our services, you can depend on prompt funding that has your business’ success in mind.
Commerce Commercial Credit is proud to offer financial resources that are used more frequently by companies that may lack the credit rating or operational history most banks require. Young and growing businesses can look to our financing solutions and receive needed capital based on their collateral.
Asset Based Lending is Good for Business
At Commerce Commercial Credit, we understand the unique working capital needs that your business experiences from time to time. Our goal is to work with you to determine the best financial solution that matches your specific strategic goals. We are a team of dedicated financing professionals ready to assist companies from a wide range of industries.
We leverage our industry knowledge with your goals and desires to create a customized solution that keeps your business soaring. Ideal businesses for our asset based financing program include wholesalers, distributors, temporary staffing agencies, trucking companies, manufacturers and oilfield companies.
Qualifying for asset based financing from Commerce Commercial Credit is a straightforward process. We offer an easy setup process, flexible terms and fast approval. Call us today at +1 (800) 928 7004 to learn more about how Commerce Commercial Credit is good for your business.