How does an Asset Based Line of Credit Work?

how does asset based line of credit work


Asset Based Lines of Credit allow you to borrow a percentage of your Accounts Receivable, Equipment, and Inventory. All or one of these assets may be utilized in an Asset Based Line of Credit. Find out below how your current assets can assist your company in obtaining the capital it needs.

Asset-Based Line of Credit with Accounts Receivable Financing:

  1. Your company provides a product or service to your customer.
  2. You provide SouthStar with an aged accounts receivable and payable summary.
  3. SouthStar will set up an open line of credit up to 85% of the qualifying outstanding receivables.
  4. Your customer submits payment made out to your company to SouthStar’s lockbox.
  5. SouthStar will collect the payments from the lockbox.
  6. 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, SouthStar 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, SouthStar will underwrite the inventory based on the ability to liquidate, if it becomes necessary.
  3. Once approved, SouthStar 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.

Learn more about how an Asset-Based Line of Credit can benefit your business!

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