The Asset Base Lending Process

How Does an Asset-Based Line of Credit Work?

Asset-based lines of credit have three main components to them. First, you have the receivables financing portion, similar to a factoring relationship, where you can borrow against invoices and purchase orders. Second, you have equipment and other tangible assets with equity in them that you can borrower against. You will need to get an appraisal on the asset(s) to establish a value. Third, you have inventory on hand. This, of course, is a moving target and can be difficult to determine what the base value is at a given period of time.

Keep in mind that each of the scenarios below may include one or more of the other categories of asset-based lending. This flexibility of cash accessibility makes asset-based lines of credit very attractive in comparison to traditional factoring or bank financing.

Asset-Based Line of Credit with Accounts Receivable Financing:

1. Your company provides a product or service to your customer.
   
   
2. You provide HomeCoast with an aged accounts receivable and payable summary.
   
   
3. Once your debtors are approved, HomeCoast will set up an open line of credit up to 85% of the qualifying outstanding receivables.
   
   
4. Instead of sending your invoices directly to your customer, you send them to HomeCoast, where we verify those invoices and stamp them with a notice of assignment.
   
   
5. HomeCoast will then send the invoices on to your customer letting them know to continue to make their payments payable to your company but giving them a lockbox address to send the payments to.
   
   
6. Your customer submits payment made out to your company to the lockbox number provided.
   
   
7. HomeCoast will collect the payments from the lockbox.
   
   
8. We will then apply the collected amounts toward the outstanding balance on your line of credit.

Asset-Based Line of Credit with Equipment:

1. You have a piece of machinery or equipment with some equity.
   
   
2. You get a professional appraisal done on the equipment to establish a value.
   
   
3. The equipment is underwritten to determine the ability to liquidate if it becomes necessary.
   
   
4. Once approved, HomeCoast will set up an open line of credit up to 70% of the value of the assets (taking into account any existing liens on the equipment).
   
   
5. As you pay down the line, you free up additional cash to use at your discretion.

Asset-Based Line of Credit with Inventory

1. The value of the inventory on hand is established either from your current balance sheet, third-party verification, or a combination of the two.
   
   
2. Once the value is established, HomeCoast will underwrite the inventory based on the ability to liquidate, if it becomes necessary.
   
   
3. Once approved, HomeCoast will set up an open line of credit up to 50% of the value of the inventory.
   
   
4. As you pay down the line, you free up additional cash to use at your discretion.