ABL: How it works

Hello and welcome to this module asset based lending. So this is going to be specifically for my real estate investors or people in the real estate industry. And you’re looking to secure some additional property passed or secure some additional financing passed just your traditional cash business line of credit on your credit card. All right. So here’s what we’re going to cover. Number one, what is asset based lending, two how it works, basically the amounts that you can qualify for, pros and cons, and then I’m even going to give you a resource that you can look into for asset based lending. So when it comes to asset based lending, this basically involves loaning money used by the borrower’s assets as collateral. All right. So that’s why the hints, the name. So it was often used for by small to mid-sized businesses in order to get, or should cover short-term cash demands.

Typically, I’m going to recommend that when you’re doing this, you’re going to be doing this for real estate, but you can also do this for assets to secure a loan like receivable inventory, marketable securities, property plant equipment. So there’s a lot of ways that you can do asset based lending. But the purpose of this is really essentially the cover the loan based off an asset or current asset that you have. So lenders commonly are gonna use loan to value ratio to determine the amount of money that they’re willing to lend. And essentially many businesses that take out or obtain lines of credit in order to meet cashflow needs, can use assets-based lending. So for example, a business might want to obtain a line of credit to make sure that it can cover its payroll costs, even if there’s a brief delay in payments and expects to receive.

So you could use this for other purposes. So a company seeking a loan can not show enough cashflow or cash assets to cover a loan. So the lender may offer or approve a loan based off his physical assets or example, or collateral. So for example, a new restaurant may receive a loan only by using its equipment as collateral. So the amounts are really going to depend on the loan to value ratio. For example, a lender may state that the loan to value ratio of this asset is 80% of whatever the marketable securities are, or basically whatever the cost is. So if it’s a hundred thousand dollars in equipment or a hundred thousand dollars in property value, they’ll say, Hey, look, we’ll loan up to 80% of that, in order to give you a loan. So instead of giving you the $400,000, even though it’s worth a hundred, we’ll own up to 80,000, because assuming you default, they want to be able to, you know, recoup what they lost from the lender. I mean, from that actual transaction and then still make a little bit of money. So the loan to ratio is essentially the loan amount that the lender is willing to loan and the asset value of the actual loan being used as collateral. So some of the pros and cons, the pros is that it’s an immediate source of working capital since it’s not a traditional loan. It also goes through a much quicker approval process. Not only is the loan easier to obtain, but it’s easier to increase, as the assets of the company increases. Also there’s a lot more flexibility. So unlike traditional loans that have be locked up with a specific purpose, it can be used as long as you qualify for business expenditure. And the businesses are looking to qualify any type of lending should verify which purchases should qualify based off that particular.

So the one I’m going to advise would be more so around real estate. So some of our cons is typically you can, if you would have to forfeit the collateral if you default. So that’s a huge thing. So if it’s real estate, that’s one thing, but if it’s accounts receivable, equipment inventory, you would have to forfeit that and a company can, you know, over mortgage is itself. So you want to make sure you’re being wise with how you do this now. I would recommend using this for real estate, not necessarily for collateral. And if you do it for collateral in your business, you want to do it as a line of credit, as well as, as opposed to just an asset. But right below this video, you’ll see there’s something called quick line capital.

And this is again, really for people in real estate investing. So you can see that this is a really, really strong way, and they have different, commercial real estate financing fix and flips and stated income commercial real estate. But if you wanted to do like fix and flip, you can come right down here and it’s covering like the different information on fix and flips and the minimum. So the minimum purchase price must be 65,000 625 FICO score could finance up to 90% of the purchase price, three flips over the last 36 months. So this is really just basically explaining how the fix and flip program works. And it’s given some recent deals in terms of how they went through. They also even do mortgages cause I was considering using this as well for a specific deal. So the terms may have changed, but when I did this and looked at this, they kind of broke down the fix and flip information, the quick line capital for 30 year buy and hold. And then, it’s basically breaking down all the details there and then the term sheet to apply right here. Nice and easy. So it was breaking down the information that would need if you were to apply and then it’s covering just those unsecured deals as well. So this is a cool little resource to take advantage of asset based lending. Just want you understand, but again, this is essentially putting up some type of asset in exchange for working capital in order to get a deal finance or done.