Asset Based Lending

Asset Based Lending: It matches your company’s assets to its borrowing needs, providing a line of credit that will keep in pace with your financing needs.

For a better understanding, let’s take a look at this scenario

Now, assume that this company does not have immediate funds available to purchase additional inventory much needed for the following sales cycle. Their inventory may last at the most 2 months depending on the mark-up on the sales, but since it takes them about 3 months to collect on receivables, this company would not have any funds to purchase additional inventory for an additional month until the accounts receivable are collected, creating a gap and stopping its operation!!!

Does this situation sound familiar to you? Have you ever run out of cash to purchase additional inventory just because your receivables were not collected?

Then, it might be time to consider a financing source. There may be many ways and many institutions that are willing to lend you money for your operations, or there may not be. The questions are:

• Where do you go to get this much needed financing?
• How much does it cost?
• Do I have to put the house that I live as collateral?
• Do I need a co-signer?
• What kind of documentation do I need to provide?
• How long will it take?

After going through the cumbersome task of finding a lender spending a lot of your valuable time and effort, then going through a loan underwriting / approval process, this is what Company A might have gotten:

• A revolving line of credit - $1,320,000
• Interest rate - prime + 1% (9.25%)
• Lender and Packaging fees - $16,000
• Collateral - Companies’ assets, personal guarantee of the owner, personal residence ($500,000).

So this was not a bad deal, but it the best deal?

• Will Company A know if the rate obtained was competitive?
• What about the terms and conditions of the loan?
• Was the line of credit offered sufficient for the business needs?

The amount offered of $1.32 million doesn’t seem to be so bad, but if we consider the turnaround time of the accounts receivables of about 75 ~ 90 days, this amount only offers enough room to keep the business as is, not leaving room for improvement. Regarding the interest rate, this company would probably qualify for a lower rate of perhaps ½ or ¼ lower (savings of about $7,000 yearly). The lender fees could be lowered significantly, if not waived completely. And the residence wouldn’t be needed as a collateral.

But how? Probably, this was the first experience that the lender/bank had with company A. Whoever is lending money wants to have as much collateral and guarantees as possible, and charge a standard rate based on the applicant’s credit worthiness. So actually, there wasn’t much that company A could do about improving the terms and conditions for this loan, right?

This is when Daewoo Financial may step into the picture to assist with which perhaps may be one of the most important decisions for your company. If, instead of handling this matter themselves, the Company A had hired Daewoo Financial to handle this deal, they would have not only been able to dedicate their valuable time to the business operations, but gotten benefits like this:

• A revolving line of credit - $2,920,000
• Interest rate - prime + 0.5% (8.75%)
• Lender and Packaging fees - $7,500
• Collateral - Companies’ assets and personal guarantee of the owner.

How is this possible? From our 12 years of experience, we have a vast network of wholesale commercial lenders and are able to go directly to a lender that can best match with Company A’s needs at more attractive terms and conditions.  With a higher line of credit, this company will not only have enough funds not only to cover daily activities, but also have rooms for the growth.

So give us a call to find out how much more Daewoo can do for your company.  Let us help you next.