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

Applying for a Home Loan

Immediately after you have signed the contract, make your application for a home loan.
When you are buying a home, financing your new home is one of life’s major investment decisions.

When you purchase a new home it is likely that the estate agent will put you into contact with their preferred mortgage originator. Mortgage originators are not finance providers, but broker a home loan from one of the financial institutions. But ultimately you are still in control, you can cut out the middleman and shop around to choose whichever mortgage lender you prefer.

They will ask you for your identification, your latest payslip, bank statements, proof of any housing subsidy, and a copy of the sale agreement. All mortgage lenders will do a credit check on you to ensure you have an acceptable credit record.

The lender will also assign an independent valuer to assess your property. This is to ensure that the loan amount that has been requested is supported by the value of the property.

Be sure to disclose your true state of affairs in your loan application, to enable lender to make a fair assessment to determine whether you will be able to afford your loan repayments. Note that all Lenders are obliged to comply with the terms of the National Credit Act.

The lender will also insist that you take out insurance on your building and any additions such as walls, paving and outbuildings etc. so that you are covered in the event of a fire, flood, damage or any other major disaster. The insurance premium can be added into your monthly loan installment. In most cases for sectional title properties, this will not be necessary, as your insurance will be included in your levy and payable to your Body Corporate.

You may also be encouraged to take out mortgage protection cover to protect your family and your home, in the event of the death or disability of the major bread winner. This is a very practical cover that protects your home and your family, as the insurance will settle your outstanding loan should you die or become disabled.

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