Asset-Based Loans: How Commercial Borrowers Unlock Capital
Many companies and project owners hold significant value that is not working for them. It may sit in commercial real estate, equipment, receivables, contracts, or mineral reserves still in the ground. An asset-based loan lets the owner borrow against that documented value, so the asset itself becomes the primary support for the financing rather than the borrower’s recent earnings alone.
At Commercial Funding International (CFI), asset-based loans are one of the funding solutions we arrange for commercial Clients. This guide explains what asset-based lending is, which assets can serve as collateral, how in-ground assets are treated, the typical loan parameters available through our network, and how to prepare a request that a Lender/Investor will review seriously.
What Is an Asset-Based Loan?
An asset-based loan is financing secured by specific collateral that the borrower owns or controls. The Lender/Investor sizes the loan primarily against the documented value of that collateral, applying a loan-to-value ratio that reflects how reliable and how readily realizable the asset is.
This differs from a conventional cash-flow loan, where the lender’s main question is whether the business’s historical earnings can service the debt. In an asset-based loan, the strength and documentation of the collateral carry much of the weight. Underwriting still considers the borrower, the use of funds, and the repayment plan, but the asset is the foundation of the request.
Which Assets Can Serve as Collateral?
The range of acceptable collateral is broader than many borrowers expect. Through our Lender/Investor sources, asset types can include commercial real estate, equipment, assignable assets, stocks, bonds, sports contracts, precious metals, accounts receivable, cash, gems, and fine art.
Beyond those core categories, other asset-based collateral with potential value for loan purposes falls into several groups.
Business-Based Collateral
Business-based collateral includes accounts receivable, aerospace leases, commercial contracts, commercial leases, construction receivables, equipment leases, international receivables, letters of credit, medical receivables, partnership agreements, purchase orders, trade acceptance drafts, vendor carry-back paper, and warehouse inventory lines.
Contingency-Based Collateral
Contingency-based collateral covers future payment streams such as commercial judgments, commissions, franchise fees, license fees, royalty payments (including mineral rights fees), and sales revenue.
Government-Based and Insurance-Based Collateral
Government-based collateral can include farm contracts, conservation reserve payments, and tax refunds. Insurance-based collateral can include annuities, corporate retirement plans, life settlements, and structured settlements and class action awards.
Whether a particular asset is fundable depends on its documentation, its value, and the Lender/Investor’s assessment. Listing an asset type here does not mean every asset of that type will qualify.
In-Ground Assets and Mined Resources
One of the more specialized forms of asset-based lending involves in-ground and out-of-ground mineral reserves. This financing is designed for current owners of those reserves who want to obtain financing leverage against them.
Our Lender/Investor underwriting group sources can provide funding of up to 20% of the documented value of the asset, with a $25M minimum funding request requirement for in-ground assets. Assets that can be considered include:
- Precious metals, such as gold, platinum, copper, and silver.
- Energy resources, such as oil, gas, and coal.
- Producing and non-producing assets.
- Minerals or metals located in a secure location or bonded warehouse.
Because the loan is sized against documented value, the quality of the technical and valuation reports is central to these requests. Owners who are still developing a mine, rather than borrowing against established reserves, should also read our guide on how to finance a mining project and review our mining project financing page.
Typical Asset-Based Loan Parameters
Every request is evaluated individually, but the general parameters available through our network for asset-based loans are as follows:
- Loan amount range: $1M to $100M.
- Loan term: 6 to 12 months or longer.
- Loan to value: 30% to 90%, depending on the asset or collateral.
- Timing: Loan decisions can typically be made soon after underwriting receives the required items and documentation. After loan approval, and depending on the time the attorneys need to draw up the loan agreement, funding can occur within 3 to 7 days.
The funding parameters, specific terms, timing, and costs are based on the business analysis and overall risk assessment and strength of the project and the Principals. Since our sources are competitive, a well-documented project can expect to receive the rate and terms it deserves.
When an Asset-Based Loan Makes Sense
Asset-based financing is not the right tool for every situation, but it tends to fit well in several common circumstances.
Value Is Concentrated in Assets Rather Than Earnings
A company may own valuable equipment, real estate, or receivables while its recent earnings do not yet support the loan size it needs. Asset-based lending allows the collateral to carry more of the credit decision.
Speed Matters
Because the collateral is the center of the analysis, a complete and well-documented request can move efficiently through underwriting. Borrowers facing a time-sensitive acquisition or opportunity may also compare this option with bridge loans, which we discuss in our article on bridge loans vs. hard money loans.
The Borrower Wants to Retain Ownership
Borrowing against an asset can provide capital without selling the asset or giving up equity in the business. Sponsors who would rather share a project with a capital partner can instead consider joint venture financing, and companies weighing a public listing may find our comparison of IPO vs. private funding helpful.
Mineral Owners Need Liquidity
Owners of documented in-ground reserves can use those reserves to raise capital for operations, expansion, or other business purposes without first bringing the resource to production.
Asset-Based Loans vs. Other Financing Options
Asset-based lending sits alongside several other solutions CFI arranges. Hard money loans are also collateral-focused, but they are generally associated with real estate. Business financing may rely more heavily on the company’s operating history and cash flow. For unusual capital needs that do not fit a standard category, our Unique Capitalization page describes additional approaches.
For projects located outside the United States, international requests carry a $10M (USD) minimum funding request requirement for all phases.
How to Prepare an Asset-Based Loan Request
The first step is a clear, concise Executive Overview of 1 to 5 pages. For an asset-based loan, it should cover:
- The borrower. Who owns the asset, the ownership structure, and the principals involved.
- The asset. A description of the collateral, its location, and how ownership or control is documented.
- The valuation. The most recent appraisal, technical report, or other third-party documentation of value.
- The funding request. The amount requested and the loan-to-value it represents.
- The use of funds. How the capital will be deployed.
- The repayment plan. How and when the loan will be repaid or refinanced.
For guidance on structuring this document, read our article on how to write a commercial loan executive summary. Our process page explains what happens after we receive your overview.
Frequently Asked Questions
What is an asset-based loan?
An asset-based loan is commercial financing secured by specific collateral, such as real estate, equipment, receivables, or mineral reserves. The loan amount is sized primarily against the documented value of that collateral.
What assets can be used for an asset-based loan?
Collateral can include commercial real estate, equipment, assignable assets, stocks, bonds, sports contracts, precious metals, accounts receivable, cash, gems, fine art, contracts, royalty streams, and other documented assets. Each asset is evaluated individually.
How much can I borrow with an asset-based loan through CFI?
The general loan amount range is $1M to $100M, with loan-to-value of 30% to 90% depending on the asset or collateral. Final terms depend on the business analysis and overall risk assessment.
Can I borrow against in-ground mineral reserves?
Yes. Our Lender/Investor sources can provide funding of up to 20% of the documented value of in-ground assets, with a $25M minimum funding request requirement. Producing and non-producing assets can be considered.
How quickly can an asset-based loan fund?
Loan decisions can typically be made soon after underwriting receives the required documentation. After approval, and depending on the attorneys’ time to prepare the loan agreement, funding can occur within 3 to 7 days.
How do I start an asset-based loan request with CFI?
Email us a 1 to 5 page Executive Overview describing the borrower, the asset, its documented value, the funding request, and the repayment plan, or call our office first. Broker inquiries are welcomed and appreciated.
Put Your Assets to Work
If your company or project holds documented assets and needs $1M or more in capital, an asset-based loan may provide the leverage you need while you retain ownership. Email us a 1 to 5 page Executive Overview or call our office to discuss your request. Learn more on our asset-based loans page or contact Commercial Funding International today.