UNDERSTANDING ASSET-BASED FINANCING

Asset-based financing is a way for rapidly growing, cash-strapped companies to meet their short-term cash needs. In general, companies can tap their assets to generate cash flow through asset-based loans or through factoring.
The asset-based financial services industry has burgeoned in recent years, and small businesses have fueled much of its growth. Although a stigma is still associated with using your assets to get cash, this type of financing is becoming more popular.

Asset-Based Loans

When you apply for an asset-based loan, you pledge assets to secure a loan from a bank or a commercial finance company. You still own your assets, but if you don’t make good on your payments, the lending institution can seize them.
Asset-based loans are typically for companies with less-than-perfect credit. Interest rates and fees on these types of loans have fallen in recent years due to intense competition, but generally they are higher than traditional bank loans. As with all commercial lending, rates are negotiable. Lenders will look at your credit record, how long you’ve been in business and whether your assets are liquid.
Accounts receivable and inventory are common collateral, but any asset might qualify. When you use accounts receivable to secure a loan, you can expect to get about 60 – 75 percent of the face value of your fresh invoices. The loan-to-value ratio drops rapidly for older accounts.
When you use inventory to secure loans, your lender will most likely use a bonded warehouse — an approved warehouse used to store goods and monitor inventory — and pass the cost on to you. Loan amounts vary widely from about 30 to 80 percent of the value of your inventory.

Advantages and Disadvantages

The main advantage of asset-based financing is that small companies can usually get more cash more quickly than they could from a traditional bank loan. Also, asset-based lenders offer an array of services.

The drawback of asset-based loans is the expense. Using your assets to generate cash flow increases your cost of funds and cuts into profits. You need to weigh your situation carefully and determine whether this type of financing is necessary to expand your company or keep it afloat.

In Short

This product is for clients who have valuable assets, but are in need of short term liquidity. Funds will be advanced against the security of commercial property for a maximum period of twelve months, affording clients ‘breathing space’ to realise their assets without pressure or providing them with the time to secure long term financing from a commercial bank.

Minimum Requirements:

The Borrower must be a Juristic Person in terms of the National Credit Act

• Maximum transaction value not to exceed 60% of valuation
• Valuation of property to be done at clients’ expense.
• Minimum advance of R1 000 000 (no maximum).
• A first bond is to be registered over the property
• Maximum term of the loan of 12 months

If you’re looking for this type of financing, Please consult with Morne Prinsloo .

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Improve your chances with Mortgage Plus

Here is what the lenders don’t want to see.

Banks don’t like to see too many recent requests for credit clearance on your record, so this is not the time to buy a new car or furniture on a hire purchase agreement.

In fact, you might even think twice at this stage about taking out a new cell phone contract or applying for a new store card.

Homebuyers should also do their best not to change jobs while in the process of applying for a home loan. Lenders look for employment stability, so if your reason for moving house is to take up a new position, you will need confirmation of this from your new employer to accompany your home loan application, in addition to your salary records from your current job.

In addition, homebuyers should not try to conceal anything in their financial past from the lender. If you have borrowed the cash to pay the deposit and will have to repay it, say so. If you have had credit problems in the past, admit to these too.

Today’s sophisticated credit checking systems will inevitably reveal the whole story, and once lenders find you have been less than truthful about one thing, they will naturally start to question the rest of your home loan application and once that happens, the chances are very good that it will be declined.

Two further pieces of advice for homebuyers are not to go on a spending spree for their new home if their home loan application is approved, and not to proceed with an application if a change in their circumstances means they will not be able to afford the repayments.

Some additional expense on a new home is to be expected, but you should resist the temptation to splash out and deplete your cash resources at least until you have taken transfer and established the actual running costs of your new home over a few months.

And if something should happen that makes a big change to your financial picture, such as a disabling accident or a retrenchment, for example, it is not a good idea to proceed with an application in the hope of securing the loan before the bank finds out what has happened. If there is a good chance you will not be able to repay the debt, you should rather withdraw the application – and keep your credit record intact.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za