Regions Business Capital provides asset-based credit facilities, which are supported by business assets such as Accounts Receivable and Inventory. Benefits of asset-based lending to borrowers include:
- Greater Flexibility: Asset-based loans generally require fewer covenants than cash flow loans since loans are closely tied to collateral value. This flexibility frees management to focus on executing the operating plan rather than worrying about meeting monthly or quarterly covenants.
- Enhanced Liquidity: If a company borrows against a multiple of EBITDA and its earnings decline, its borrowing capacity is diminished. Borrowing against assets may result in greater liquidity and more predictable availability.
- Patient Capital: Because asset-based loans are closely tied to the collateral, asset-based lenders can give borrowers more time to work through a market fluctuation or turnaround in the event of financial difficulty than cash flow lenders. Chief financial officers sometimes prefer asset-based loans over a cash flow structure to assure funding in the event of a business or economic downturn.
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