Have you exhausted your efforts at the bank?
1st Commercial Credit offers asset based lending for companies that need to maximize their borrowing capacity using accounts receivable financing and inventory as collateral. Receivable based financing combined with inventory finance has become a useful tool for many under capitalized businesses.
Unlike traditional bank debt that relies heavily on balance sheet ratios and cash flow projections as loan criteria, 1st Commercial Credit will evaluate a client's business assets as its primary focus to establish the borrowing base. The result is usually far greater borrowing power than can be achieved from a traditional cash flow banking approach due to our expertise in industry specialization.
The fact is banks prefer to lend on stationary tangible hard assets, and occasionally inventory and receivables are considered as part of the borrowing base but at a low advance rate. 1st Commercial Credit can offer higher advance rates due to our experience in receivable valuation.
In the event where the client already has a bank line of credit, an Inter-creditor agreement is made between the bank and 1st Commercial Credit where the receivables are assigned to 1st CC and therefore allows the client to borrow at higher advance rates.
In order for a client to be approved for asset based financing, the business must have several conditions in order to apply.
Sales Revenue & Parameters
1st Commercial Credit has various funding programs for businesses averaging monthly sales revenue from $2.5 Million a month to $10,000,000 a month. The structure of an asset based financing facility will depend on the credit history of the owners, number of accounts, billing cycle, financial status of the applicant, type of industry, master sales agreements, and proof of delivery documentation.
Accounts Receivable Assets
Our funding program must have a core asset of accounts receivable. The business must maintain a recurring invoicing process with the same account debtors and bill under net 60 day terms.
We will consider inventory asset financing depending on the clients needs. The borrowing base must stay under 25% of the accounts receivable face value.
Fixed Equipment Asset Finance
1st Commercial Credit can provide the business with Asset Purchase of equipment and refinance the assets at a longer term. This is usually provided by an affiliate lender that specializes in the specific equipment to be financed.
The majority of our prospective clients are under capitalized companies that have good performing receivables and are growing faster than their cash flow intake. Asset based financing works well with manufacturers, distributors and service companies with a leveraged balance sheet whose seasonal needs and industry cycles often disrupt their cash flow.
Asset Based Lines of Credit are main attractions in today's competitive business world with fast and steady funding provisions. Since they supply a continuous flow of cash by means of revolving lines of credit, they provide financial support and stability to the day-to-day operations of their commercial borrowers. Each borrowing company's credit line is determined by the combined worth of its assets. These assets may include accounts receivable and inventory, business equipment, manufacturing machinery, certain contracts with recurring revenue, or personal assets of business owners.
Acceptable collateral for most asset-based loans (ABLs) includes accounts receivable, inventory, business equipment, and factory machinery. Appropriate inventory may be both finished goods and marketable raw products. In some instances, certain personal assets of business owners may be requested by lenders as collateral.
Since both accounts receivable and inventory are renewed throughout the year at periodic intervals, they are in the favored classification of eligible collateral.
The majority of businesses can benefit from using asset-based loans to help with growth and consistent access to working capital. Businesses in the acquisition, expansion, or turnaround stages can find great value in working with asset-based lenders. All companies with assets that include accounts receivables, inventory, or fixed assets should consider an asset-based loan as an alternative form of financing. ABL does not require many years in business, an implacable credit record, and it does not add additional debt.
Asset-based lending is not the right solution for every business. One example is businesses that use a recurring revenue model have no assets due to the nature of their business. Those companies dealing primarily with cash transactions would also not be a good fit.
What are the best industries for asset-based lending?
We offer competitive services for financing and lending to manufacturing businesses every day. Sectors that have a capital-intensive nature tend to be the perfect fit for asset-based lending. If you're a manufacturer or distributor, you're most likely an ideal prospect for an asset-based lender like 1st Commercial Credit. The stronger your collateral reserve is, the more attractive a lender will find your company's situation.
Financing distributors is an easy process for us, and we can give your company immediate access to funds. A vast number of industrial businesses are also thriving with our asset-based loans. Companies in industries with seasonal sales also benefit from the fluidity of an asset-based loan. Long-standing sectors taking advantage of asset-based lending include apparel, retail, staffing, and business service companies that extend credit to their customers.