We have been sharing a lot about alternative financing, and one method we want to highlight is asset-based lending. Asset-based lending is a secured financing method, which allows the borrower to pledge assets as collateral to secure the financing.
What this means for the borrower, is that they are agreeing to turn an asset over to the lender if repayment through other means is not possible. The asset secures the loan, which usually is between 60% – 90% as a loan-to-value ratio. The more liquid the asset, likely means, the higher the ratio.
Some other variables that are considered during evaluation of an asset-based loan includes; ownership, management team, history of the company, and balance sheet to name a few.