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The drama of borrowing ACCOUNTS-RECEIVABLE

BREAKEVEN WORKSHOP


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ASSET-BASED LENDING

Often the heart of the asset-based credit facility, a well-run accounts receivable can be an excellent source of working capital for a growing firm. Finance companies, as well as some banks, make these type of loans.


GENERAL CONSIDERATIONS

  1. Accounts-receivable
  2. The A/R is no stronger than the account debtors. If sales are to AT&T, IBM, and EXXON, the value of these receivables as collateral is much stronger invoices from Cal'dor, Hermans or OPM Leasing. With top-quality debtoss who pay within terms, it is possible to obtain financing of 80% of the value of the A/R. The interest will be the Prime Rate plus a few points.

  3. INVENTORY
  4. Unless your inventory is gold or paper, lenders are reluctant to fund more than 30%to 40% and then only in conjunction with the A/R.

  5. EQUIPMENT
  6. Lenders generally consider lending about 50% of the "quick sale value" with a weak A/R and maybe up to 70% if the company has substantial positive cash flow.


Other Considerations