Unlike senior Commercial lenders like banks, asset based lenders are primarily concerned with the underlying asset that the company has and which can be lent against. This asset is typically a set of Accounts Receivable or Equipment but can be any type of asset e.g., a contract. They evaluate the asset based on its sale-ability assuming they had to repossess it and assign a lending value to it keeping in mind their costs to sell it. The assumption often is that because the company is approaching a bank, it must be of lower quality and therefore may not be able to pay back the loan, hence the lender may be stuck with having to sell the underlying asset.
Most asset based lending is done by small institutions or private lenders and there are hundreds out there. Every one of them has built their business on the back of assets they are comfortable with and rarely does one do all kinds of asset based deals. Knowing as many of these lenders and their respective appetites is very important, even though most intermediaries tend to work with the same set of 2-3 firms that they have good success with.
At Platinum Consulting we pride ourselves in having strong relationships with a variety of lenders and work with the ones that can deliver on their promises.