Asset based lending is basically a business loan that is secured by an asset. The amount you can borrow is based on a percentage of the value of the asset pledged. The asset can take many forms accounts receivable, inventory, real estate or other types of assets listed on the business balance sheet. The interest rate is lower than unsecured loans since the lender can seize the asset if the borrower defaults.
Inventory financing is usually based on current inventory values and this type of financing is used as a cash advance for the business to finance operations. This type of financing is also based on a percentage of inventory values and the percentage is around 50%. This percentage is dependent on whether the inventory is finished goods or parts inventory. Non finished goods (work in progress) would have a lower loan advance available and is more difficult to find a lender. Financing inventory loans are usually advanced in conjunction with accounts receivable financing.
This type of financing is usually used to purchase equipment and furniture. Equipment leasing is one of the most common ways to finance equipment. A leasing arrangement frees up the business capital for other business interests. There are various types of leasing arrangements dealing with length of term, buy-out or turn back the equipment to the lender, and considerations regarding taxes.
Real Estate Financing
This type of financing can be used for a variety of real estate scenarios. It can cover the purchasing of land and building, to building new construction or renovating a property. The amount to be advanced from a lender is again dependent on a variety of factors. Financial statements of the business, the owners financial statements, experience and length in construction, development etc.