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Asset-Based Financing

 

Asset Based Financing

 


An Asset-Based Line of Credit (ABL) is considered alternative financing. Similar to a traditional line of credit offered by a bank, but with fewer restrictions. If you have had a traditional line of credit you will understand what loan covenants mean and how difficult they can be to comply with. This is a transitional step, when you are in between factoring and qualifying for traditional bank financing.

There are many reasons why you may be in this position, but the bottom line is, that you are just too highly leveraged for a bank.

The principle collateral used to secure an Asset-Based Line of Credit is accounts receivable; however, it is not uncommon for an Asset-Based Line of Credit Lender to look for "secondary" collateral. Secondary collateral is simply some other assets that you have that have equity or ownership, i.e. equipment, property or inventory.


 

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