Asset Based Loans

Asset Based Loans

Huntington Coast Capital has been procuring asset based loans for our business owner clients in Huntington Beach, California and across the country since inception in 2010. An asset based loan is a loan secured against inventory, accounts receivable, equipment, purchase orders or property.

More flexible than bank lending programs, asset based loans focus more on the asset being leveraged versus the company balance sheet. The underwriting process for asset based loans ranges widely and there is typically a direct correlation between how lenient the lender is and the rates being charged. Traditional bank financing is difficult to qualify for and comes fraught with covenants and restrictions. Asset based loans are more flexible and entrepreneurial in nature. They allow business owners to improve their cash flow and reach their goals with fewer requirements for funding.

Looking for an asset based equipment loan? Visit our sister company Equipment Finance Quotes ( for a quick and easy online application process for all of your commercial equipment financing needs!

How To Qualify For An Asset Based Loan

A common misunderstanding borrowers have with asset based loans is all that is required are assets offered as collateral. While this is part of the equation, it is not the whole picture. In order to qualify for an asset based loan you need these two things:

  • a collateral type that is desirable to the lender
  • monthly cash flow adequate enough to cover the monthly payments on the new loan

Let’s break this down a bit further.

Collateral type simply means collateral offered that the lender can secure the loan against that is easily appraised, of value, has application outside of the debtor’s business and is easily retractable should the lender need to repossess the item(s) in the event of default.

Examples of asset categories that are difficult to use as security for an asset based loan:

  • specialty technology equipment that is subject to near horizon obsolescence (i.e. computer software and applications)
  • in-ground equipment such as mining equipment
  • any in-wall operational equipment (i.e. HVAC systems, drainage, etc.)
  • Cargo ships, railcars and other commercial multi-state or internationally used equipment (trucks and trailers used for business are eligible)
  • offsite equipment domiciled outside of the borrower’s location
  • real estate used as a primary residence

The above examples are risky for asset based lenders because they could either dramatically drop in value (technology industry) or be difficult or impossible to repossess in the event of default.

Examples of asset categories that can qualify for an asset based loan: 

  • real estate held as an investment property
  • manufacturing equipment
  • non-technology based standard equipment parts used in specific industries
  • accounts receivable and invoices presented to credit worthy customers
  • purchase orders and committed contracts for service from credit worthy customers
  • inventory held by a business net of any slow turning or obsolete items

The above lists are not totally inclusive as there too many collateral types to mention. However, when applying for an asset based loan keep in mind the quality of the asset you are using as collateral and your cash flow position. Does your collateral have a broad functionality and considered “desirable” in the market? Do you have discretionary cash flow from your business to cover the monthly payments after all other expenses?

If your business could benefit from an asset based loan, we would like to speak with you. Not all asset based lenders are the same and we will help you navigate the waters. For more information call 844-239-2632 or click the Apply Button below. We look forward to assisting the growth of your business!