Asset-based lending is a funding solution, which has its origins in the US. This type of facility is now regularly used in the UK.

Unlike invoice discounting which only provides funding against debtors or receivables, an asset-based lending facility will also take account of your stock or inventory. The lender will provide finance up to 65% against stock. This is usually after reserves for retention of title and PAYE/VAT liabilities. This short-term working capital facility is called a revolving credit facility or evergreen facility.

In addition, asset-based lenders can also provide term loans up to 80% secured on plant and machinery and up to 65% secured on property or real estate.

Because asset-based lenders give value against all of a company’s assets, the flexibility this brings can make this type of finance solution attractive when compared to a traditional bank cashflow or secured facility. It works extremely well with businesses that are asset rich, particularly old economy companies. It has already helped many MBO’s and MBI’s and also supported the funding of public to private transactions.

How can we help?

We have direct experience of working with this type of funding solution having participated in the structuring of asset-based lending facilities in excess of £250 million during the last 4 years, including a public to private. We know how the asset-based lenders work and how best to structure your funding solution to make it attractive to both you and your prospective new lender.

How much does it cost?

Funding you business using asset-based lending is in line with what you would expect to pay a high street clearing bank for a cashflow type facility. The cost of borrowing on a revolving credit facility would be in the region of 1.75% to 2.5%. You would also pay a closing fee of circa 0.5% to 1%. Should you decide to seek finance against your fixed assets, term loans would be charged at similar rates to your working capital line. However, in order to support term loans you would need to have up to date appraisals or valuations undertaken of your fixed assets, and the costs would be for your account.