Asset based lending / stocking finance
Asset based lending or stocking finance is usually used in conjunction with an invoice discounting or factoring facility.
There are no stand alone facilities currently available in the market place.
All cash flow finance companies say they do asset based lending or stocking finance but in reality very few do a true revolving stocking facility.
The best funders provide a revolving facility against raw materials and finished stock usually at 30% and 50% respectively. This is advanced over and above the agreed prepayments for your factoring and invoice discounting facility typically at 80-90%. Therefore total funds advanced can be in excess of the total debtor book secured by way of a debenture covering debtors, raw materials and finished stock.
Many invoice discounting companies say they will advance against stock but they will only do so on a temporary basis usually 12 months and to a maximum of 100% of the debtor book. This usually happens when a customer is switching factoring companies taking up invoice discounting for the first time and needs some additional working capital maybe for a management buy in or buy out.
How Does It Work?
Asset based lending is also associated with stocking finance. Again the invoice discounting companies advance against the debtor book, raw materials and unencumbered equipment in the business. Asset based lending is usually used by corporate finance accounts in structuring mergers and acquisitions. However these facilities can be used by any business wishing to reduce their exposure to the bank.
Whilst stock must be added to the invoice discounting or factoring facility equipment refinancing need not. This can be done on a stand alone basis and specialist equipment refinance companies tend to do a much better job.
XL Business Finance has the expertise to select the right stocking finance and factoring company depending on your specific status and financial needs.