Asset Based Lending secured on plant & machinery, property, materials, goods, debtors

What is Asset Based Lending?

Asset based lending takes a traditional invoice finance facility (i.e., Factoring and Invoice Discounting), which is secured on debtors only and allows companies to borrow against all their other business assets, including even trademarks and intellectual property. Cash Flow loans can also form part of the package. The additional leverage generated by a total asset based lending solution can be up to 40%.

Typical advance levels are:-

Advantages of Asset Based Lending

The key benefit of an Asset Based Loan facility lies in its flexibility when compared with a bank overdraft. Asset based loans are proving increasingly more popular with small businesses and larger companies and in the second half of 2008 industry deals worth £1.5bn were completed.

Growth of Asset Based Financing

As a result of the banking sector fall out in 2008, any company that is looking to raise additional finance, or whose existing overdraft facility falls due for review in 2009 is going to find it a very difficult and painful exercise.

With the banks continuing to shrink their lending books companies are having to look elsewhere for alternative business financing solutions.

Many companies are asset rich, cash poor. The key is to look at all the assets on their balance sheets and to utilise these as a way to secure the additional funding and loans their businesses require whilst bank overdrafts remain difficult to obtain.

Which Businesses Use Asset Based Loans

Many businesses are switching to total Asset Based Lending packages to meet their cash flow and capital investment requirements.

ABL can even help companies that are experiencing trading difficulties and is available to support businesses through a Turnround or Restructuring situation or, if all else fails a Pre-pack.

Asset Based Lending (ABL) is ideally suited for businesses turning over £1m to £500m with no upper limit and is ideally suited to:-

• Re-finance of existing bank facilities - increasingly important in 2009/10
• Management Buy-Outs (MBO's)
• Management Buy-Ins (MBI's)
• Acquisitions
• Mergers
• Exiting Shareholder(s)

In these situations more funding can be raised than a conventional overdraft - and in so doing there will be less need to call on venture (or should that be vulture) finance. This ensures maximum retention of equity for the existing management/shareholders.