Asset Based Lending

Every small and medium business is experiencing a financial credit crisis at the moment. One of the first steps out of a credit lock down will be asset based lending. This type of lending was once considered a last resort finance option, but it has become popular because companies do not have access to more traditional capital resources. As the term explains, the lender is focused on the collateral not the credit worthiness of the borrower. This type of lending is typically used for equipment inventory, accounts receivable and other liquid assets. We all know the draw backs of high interest rates and the ability of lenders to seize the assets.

You may need to look at this type of lending but remember the lessons that you have learned over the last few years. Many of your competitors have gone out because of excess borrowing. You also want to remember that personal guarantees have a real bite to them. They should not involve your spouse, and be prudent to whom you give those guarantees. Check out a recent article in the Wall Street Journal, which discusses the pros and cons of asset based lending and its drawing popularity.

Asset Based Lending