Understanding Asset-Based Lending

Posted By: respadmin | August 18, 2017

Asset-based lending is a type of lending secured by an asset of the company. More commonly, however, this phrase is used to describe lending to businesses and large corporations, using assets not normally used in other loans. Typically, these loans are tied to inventory, accounts receivable, machinery or other equipment.

If the loan is not repaid, the assets are taken. An asset-based lender will usually have a revolving credit limit that fluctuates based on the actual accounts receivables balances that the company retains on an ongoing basis. Since the level of funding is contingent upon asset values on the balance sheet, there may not be sufficient liquidity. Mostly asset-rich companies would likely benefit, while many service companies will not.

A hybrid approach, such as a funding company, can be the best alternative to leverage money without giving away equity or taking on debt. Advances are made against your customer invoices to give you the cash flow you require to fill the gap between when your company provides a service and when your customer pays.

Funding companies such as AGR Financial offer a smorgasbord of services specifically designed for staffing companies. Advances arranged on sliding scale and as much as 90 percent allow clients to decide from week to week their cash flow needs.

Lower rates also are a reward for high-volume growth. Concurrent with advances, business owners can elect to outsource back office and administrative tasks such as payroll and related chores, billing and collection functions. Customized plans offered by AGR give business owners the power to focus on the core business of selling staffing services.

More staffing companies today are putting a stronger focus on the expense side of their income statement. Business owners understand that that the type of institution they borrow from will influence the terms and conditions of the loan, which affects how the business is managed both today and well into the future. With this in mind, many of these companies have turned to AGR Financial for expert advice and assistance.

Read more about programs designed specifically for the staffing industry.

— Robert Wahlers

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