Private Asset Based Lending Offers a More Flexible Financial Solution

Asset based lending usually has a lower rate of interest and in the event of non-payment of the loan the lender can always recover it by liquidating the assets connected to the loan. Most big banks and financial institutions that are privately owned offer this kind of loan package to needy industries.

These loans typically are connected to inventory, receivables, accounts, machinery and equipment. This kind of lending comes into force when companies fail to raise funds through normal routes such as secured mortgages or unsecured bank and capital markets (i.e. selling the shares to investors). This frequently happens because many companies exhaust their limits of capital choices, or they are in need of immediate funding for meeting the demands of a new project that includes a mergers inventory purchase, debt purchasing or acquisitions.

Asset based lending is a huge help to industries when their normal route of funding dries up. It is a kind of loan that is secured by an asset where the asset will be taken away by the financing company if the customer fails to repay the loan. It can be seen as being similar to a mortgage, but this term of asset based loan is generally used for large companies where the assets used do not figure in other loans.

Similarly, agriculture finance ranging from short to medium to long term loans are tied to crop and livestock insurance and also the entire value chain of agriculture such as production, distribution, processing marketing and wholesaling. Agriculture is a major source of income for people living in rural areas, and it can be a big challenge for farmers to get sufficient finance to successfully raise crops, market and sell them. Due to a lack of finance the agriculture sector is not able to get the latest technology required for increased production and efficiency. Therefore, partnership based lending to the agriculture sector has hugely leveled these short comings and financial institutions and banks now offer various loan packages that are asset based.

Asset backed lending is regularly available for the industrial and agriculture sectors and is hugely beneficial for the SME sector as they are the ones that are usually short of funds to run their chosen industry. The privately owned financial institutions are more flexible in their approach and can tailor the loan according to the need of a customer without much fuss. They are also the quickest to respond to queries and offer the most efficient asset based lending services.