Asset-based lending uses eligible business assets to support a revolving or term financing facility. Accounts receivable, inventory, equipment and sometimes commercial real estate can form part of the borrowing base.
Sierra Capital Advisory helps businesses evaluate whether an asset-based structure provides better capacity or flexibility than financing based primarily on historical cash flow.
When Asset-Based Lending May Fit
- Rapid growth is creating working-capital pressure
- The company maintains substantial receivables or inventory
- Cash flow is seasonal or temporarily inconsistent
- A refinancing requires a collateral-supported structure
- An acquisition or turnaround includes valuable operating assets
Common Borrowing-Base Assets
Accounts Receivable
Eligible commercial receivables may be advanced at a percentage determined by customer quality, aging, concentration and dilution.
Inventory
Finished goods, raw materials or other eligible inventory may contribute to availability after appraisal and lender exclusions.
Equipment
Machinery, vehicles and other business equipment may support a term component based on appraised liquidation or orderly-sale value.
Asset-Based Lending Versus Cash-Flow Lending
Cash-flow lenders focus primarily on earnings and repayment capacity. Asset-based lenders monitor collateral availability and may require regular reporting, field examinations, appraisals and controlled collections. Businesses should evaluate both financing capacity and administrative requirements.
Documents Commonly Requested
- Accounts-receivable and accounts-payable aging
- Inventory reports
- Equipment lists and appraisals
- Financial statements and bank statements
- Debt schedule and lien information
- Customer concentration and dilution history
Explore accounts-receivable financing, equipment financing, private credit and all financing programs.