Asset-Based Loans

Any corporate loan backed by solid collateral is an asset-based loan. It differs from a Corporate Bank Loan (see above) in that your profits may be low, and the debt-to-equity ratio may well be 4-to-1, 5-to-1, or even higher. What is needed are assets: accounts receivable, inventory, real estate, and machinery & equipment. It helps to have been in business for a couple of years, as no lender wants to come get your inventory and machinery. Be realistic about such loans. Yes, you think your company is going to make it, but lenders have seen and heard it all before. From their point of view, they're receiving only a few points of interest, and they don't want to take a loss or have the aggravation of foreclosing for what to begin with is a small return. Porter Capital makes asset-based loans.

Advantages: Moderate cost, medium scrutiny and monitoring after initial funding.

Disadvantages: Intense due-diligence process, as the lender wants to make certain he can realize his money from your assets if you fail.

Current Availability: This market has lost several key players, and the market is tight. Unless you're looking for $5.0 million and up, if you find a lender don't quibble about his rates.

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This Guide includes information on business financing options and how to decide which is best for your business.