Asset Based Lending Audit Services

Asset-based loans
An asset based business line of credit is usually designed for the same purpose as a normal business line of credit - to allow the company to bridge itself between the timing of cashflows of payments it receives and expenses. The primary timing issue involves what are known as accounts receivables - the delay between selling something to a customer and receiving payment for it.

A non-asset-based line of credit will have a credit limit set on account opening by the accounts receivables size, to ensure that it is used for the correct purpose. An asset-based line of credit however, will generally have a revolving credit limit that fluctuates based on the actual accounts receivables balances that the company has on an ongoing basis. This requires the lender to monitor and audit the company to evaluate the accounts receivables size, but also allows for larger limit lines of credits, and can allow companies to borrow that normally would not be able to. Generally, terms stipulating seizure of collateral in the event of default allow the lender to profitably collect the money owed to the company should the company default on its obligations to the lender.

Asset-based lenders will advance funds based on an agreed percentage of the secured assets' value. The percentage is generally 70 percent to 80 percent of eligible receivables and 50 percent of finished inventory.

Asset-based lending is the business of loaning money in an agreement that is secured by collateral. An asset-based loan or line of credit may be secured by inventory, accounts receivable, equipment, or other property owned by the borrower.

The asset-based lending industry serves business, not consumers. It is also known as asset-based financing or commercial finance.