Title : Asset – Based Lending Grows in Popularity.

Summary:

More small businesses are turning to asset-based loans. A three employer company, Weezabi LLC, one of the few licensed to make ‘Crimson Tide’ merchandise, needed 60,000 t-shirts. Weezabi pledged as collateral part of its future revenue to FTRANS, an Atlanta based lender and credit analyst, since it didn’t have the time to pursue more traditional capital resources. Asset based lending was once considered a last resort finance option, but now it’s viewed as ‘fireman of the crisis’, because it took risks that a lot of companies will not take. Borrowers put up equipment, inventory, accounts – receivable and other liquid assets in exchange for the money. Asset based lending, excluding mortgages, swelled by 8.3% to almost $600 billion in 2008, according to the Commercial Finance Association, an industry trade group. Last year asset based lenders made 30% more money than they did in 2008, that is, $761 billion. Therefore asset based lending is a very good option for small businesses that have spotty or short track records.

Analysis:

The asset based finance industry is still dominated by Wall Street’s biggest firms. During economic crisis many companies pulled back, but those companies are now quickly getting back into business. Asset based lenders prefer to work with companies whose collateral can quickly be turned to cash. Interest rates are generally higher than the traditional bank loans, but lower than most credit card arrangements. The advantages make it the best option for business owners who need liquid cash in times of urgent need. The advantages are that, loans can be obtained quickly with less paper work to be done and asset lenders are flexible and are ready to make terms and conditions according to the need of a particular business. These advantages tend to over shadow the disadvantages of asset-based lending, which include, high interest rates, asset based loans are secure, lenders can legally seize assets if the borrower misses payments,...