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What is an Asset Based Loan?

An Asset based loan is a way for small businesses to secure financing from lenders by using their companies' assets as collateral such as invoices, inventory, equipment, machinery, or commercial property. Accounts receivable financing and factoring are some of the most common types of small business asset based lending. Accounts receivable is used as collateral in the former while AR actually sold to a third party for a discount price in the latter type of financing. ABL works like a revolving loan meaning it's accessible when you need it, and you can pay it down whenever you choose.

Loan Amount

75% – 85% of the value of AR Or 50% of the value of inventory or equipment

Interest Rate

Based on the type of asset available as collateral, the level of risk, and the financial performance of your business.

Funding Time

As fast as 48 business hours

Cost

Based on the current annual percentage rate (APR), which ranges between 7% and 17%

Security

The asset serves as collateral

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Our Asset Based Loan structure allows you to secure funding to meet your business's unique financial need without any credit checks and only your asset is used to get the amount. Our innovative and secure small business lending platform helps you compare interest rates, terms, and payments for a variety of ABL lending options and get a quick approval within 24- 48 business hours.

How an Asset Based Loan can be used?

There are a variety of reasons why you can use an asset based loan. Some of the reasons include:

Working capital to keep business activities running (most common use of ABL)

Maximize growth opportunities

Manage a successful turnaround

Acquisition, merger, or buyout

Refinancing existing debt to improve cash flow

Funding a large contract

International expansion

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Why you should choose an Asset
Based Financing?

Easy and quick to obtain

These loans include less documentation and quick processing than many of its counterparts like unsecured loans and lines of credit.

More Flexible than loans and overdrafts

ABLs are extremely flexible when it comes to how you spend it. There are no such restrictions attached, like other loan forms.

Don't need to have perfect credit

Asset Based Lenders are less worried about your business' previous cash flow, profitability, or even your own and business credit and revenue history. Generally, these loans are secured against the value of your assets.

Less personal risk involved

You don't require signing a personal guarantee or putting up collateral, like a family home or car in ABL loans. Since some specific assets from your business' balance sheet are used as collateral by the lenders, there's less personal risk involved.

Lower rate of interest

Asset based loans generally come with lower interest rates than many of its counterparts.

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Documents Needed for an Asset Based Loan

Profit and Loss Statement

Business Tax Returns

A/R and A/P Aging Report

Balance Sheet

Inventory Report

Debt Schedule

Find and Compare the Best Asset Based Loan Offer with Smansha

We work with more than 40 lenders across the whole small business finance market. If you're looking for asset based financing to run and grow your business, we can help you find, compare and secure the right funding that fits your business needs and budget.

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  • How does an asset-based loan work?
    • With this type of lending, an asset-based lender offers small business owners an advance of capital on the market value of their secured assets. The loan amount often depends on the type of asset you’re using as collateral. For example, you can usually secure a 50% loan amount of your equipment and inventory as these assets can’t be easily liquidated and their values often decrease over time. Meanwhile, there are chances of borrowing 80% to 90% of the value of your accounts receivables since their values won’t change with time.
  • What assets can be used to secure a loan?
    • Any fixed assets can be used to secure an asset-based loan. This collateral could be in the form of real estate, equipment, inventory, machinery, company vehicles, and even accounts receivables.
  • How is asset-based lending different than factoring?
    • Both asset-based lending and factoring are sometimes confused as the same. The major difference is that you sell your assets to a lender in factoring while you borrow against them in asset-based lending. Factoring can only use accounts receivables as collateral while it extends to other assets like real estate, machinery, equipment, and raw materials in asset-based loans.
  • Who can benefit from asset-based lending?
    • Asset-based might be a great financing solution for all the companies that are experiencing seasonal lulls, seeking additional funds, or have an inconsistent marginal cash flow. From government services to manufacturing companies, food & retail, real estate, technology, transportation & logistics, distribution, and many more, there is a plethora of companies that are good candidates for asset-based loans.
  • What are the qualification requirements for an asset-based loan?
    • Although it’s the value of your business’ assets that lenders primarily take into account when reviewing your application – that doesn’t mean they don’t look at your business's financial standing. To improve your chances of being approved for an asset-based loan, it’s significant to prepare the following documents in advance:
    • 1. Balance sheet
    • 2. Present and future cash flow forecast
    • 3. Sales forecast
    • 4. Profit and loss statement
    • 5. Business bank statements
    • 6. Business tax returns
  • Why you should choose an asset-based loan?
    • Asset-based loans can provide numerous cash flow and working capital solutions for small and medium-sized businesses. If you’ve been facing difficulty getting approved for a business loan from traditional lenders, an asset-based loan can be a lifesaver for you. It’s easy, quick, and provides funds for a variety of business purposes. Since these loans primarily use specific assets as collateral, they’ll typically pose fewer documentations and paperwork. Moreover, since asset-based loans are less concerned with your personal or business credit scores, revenue, or past cash flow – they might be a great financing option for aspiring entrepreneurs and small business owners with poor credit.
  • What can you use an asset-based finance for?
    • An asset-based loan can be used to fund a merger or acquisition, cover day-to-day business expenses, address debt consolidation, purchase new inventory, and many other financial situations.
  • How to apply for an asset-based loan with Smansha?
    • Applying for an asset-based loan with Smansha is a quick and easy process! Sign up at Smansha and apply for financing at our innovative lending platform in few minutes. Once approved, you will receive funds in 4-7 business days.