Bank Lending V. Asset-Based Lending
Banks and asset-based lenders – two capital sources but with some significant differences in assessing to whom they’ll lend:
Banks: | Typically rely on a company’s creditworthiness and cash flow projections. |
Asset-based lenders: | Leverage a company’s assets (accounts receivable, inventory and equipment) as collateral for loans. |
Banks: | Assess the borrower’s credit history and financial health. |
Asset-based lenders: | Focus on the value and liquidity of the company’s assets; provide more flexibility for companies with valuable assets but limited credit history. |
Banks: | Offer lower interest rates for companies with solid credit. |
Asset-based lenders: | Typically offer higher interest rates due to increased risk for the lender. |
Banks: | Impose financial covenants (e.g., debt-to-equity ratios or minimum liquidity requirements). |
Asset-based lenders: | Covenants, if any, typically focus on ensuring the value of the collateral supports the loan amount. |
Asset-based lenders are a go-to resource when companies’ financing requests are turned down by banks or when they’re asked to exit their banking relationship primarily due to covenant violations. Asset-based lending is a short-term financing solution that provides businesses with a pathway back to bank financing.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.
If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or mhafner@celticcapital.com, or visit us at www.celticcapital.com.