Lines of Credit

Lines of Credit

Asset-Based loans provide businesses with immediate funds and ongoing cash flow in the form of a revolving line of credit based on a percentage of the value of the company’s assets, such as commercial accounts receivable, inventory, and machinery & equipment. Interest is calculated on the funds advanced.

Many companies use Asset-Based lending as a constant source of working capital and borrowers only pay interest on the funds they draw. Companies also use Asset-Based lending when they haven’t been able to secure financing through traditional lenders for a multitude of reasons.

Top 5 Reasons Companies Choose Asset-Based Lending

  1. Optimize working capital
  2. Support continued growth
  3. Take advantage of opportunities
  4. Need for flexible and customized package
  5. Unable to get traditional financing due to high growth, limited sales history or restructuring situations

Transaction Size

Asset-Based revolving lines of credit range from $250,000 to $3,000,000.

Criteria

Most companies qualifying for an Asset Based loan will be B2Bs (business-to-business) in manufacturing, wholesale, distribution or business services generating commercial accounts receivable.

In most cases, annual sales range between $4 to $25 million. The due diligence period for lines of credit approval is often 20 to 30 days and requires the following:

  1. Balance sheet tangible equity
  2. High quality account debtors
  3. Cash lockbox receipts through Sterling
  4. Low dilution of accounts receivable
  5. Two years of tax returns
  6. Personal guaranty from ownership group
  7. First secured position on all assets of borrower
  8. Satisfactory third party collateral field examination prior to funding