Asset Based Lending Solutions

Different Evaluation Process: ABL financing is distinct from cash-flow financing. In cash-flow financing, lenders typically assess your financial health using metrics like your debt relative to your earnings (funded debt divided by EBITDA), your EBITDA margin (earnings before interest, taxes, depreciation, and amortization as a percentage of revenue), and your operating cash flow.

Focus on Business Assets: In ABL financing, the primary focus is on the value of your company's assets, which are used as collateral to secure the loan. These assets serve as a safety net for the lender if you're unable to repay the loan.

Accounts Receivable: Typically, only current receivables are considered. These are payments that are either less than 90 days from the invoice date or no more than 60 days past due.
Inventory: The value of the inventory your business holds.
Machinery and Equipment: The worth of your business's machinery and equipment.
Real Estate: The value of any real estate owned by your business.
Intellectual Property: The value of patents, trademarks, and other intellectual assets.

Your company will undergo field examinations to assess the quality and quantity of its financial and physical assets. This process helps determine what assets can be used as collateral and the advance rates (how much money you can borrow against these assets).

One significant advantage of ABL is that it often involves fewer financial covenants compared to cash-flow lending. Financial covenants are requirements that companies must meet to ensure they can repay their debt. In cash-flow financing, if your company's sales drop significantly, it might struggle to meet these covenants, which can result in the lender reducing credit availability, increasing interest rates, or taking other protective measures. However, with ABL, because the loan is backed by your tangible assets, lenders are less concerned about the possibility of a default. Your business typically only needs to maintain a minimum level of liquidity to avoid being subject to a financial covenant.