Asset-Based Loans Rates & How They Are Calculated

Size of the Loan 

Asset-based lending interest rates are influenced by the size of the loan. At Accord, the asset-based loan rate will vary on loans that range from 1 to 20M.

Larger loans require more assets (or collateral) in order to cover the borrowed amount. Therefore, the lender must be comfortable with both the quality and quantity of the assets they are lending against.

Large amounts of quality (financeable) assets are typically—but not necessarily always—associated with bigger corporations and/or mature businesses/markets. Due to the stability of such assets (and the lenders confidence in their ability to liquidate), lenders can offer a lower rate, because their perceived risk is lower.

Assets 

The quantity and types of assets will play a role not only on the overall size of the asset-based loan, but in the rate as well. Each lender will view your collateral in a different light based on their experience and expertise. Some lenders will only lend against commodity-type assets, while others are more comfortable with finished goods. There are also lenders who prefer to utilize real estate, machinery or accounts receivable as collateral.

The ability to insure the collateral can also play a role in the asset-based lending rate. Some asset types are easily insured, while others are more difficult to insure. This can influence the lenders confidence in the collateral, and therefore influence the asset-based loan rate.

As mentioned above, the quantity of collateral can also affect the asset-based loan rate. However, beyond the overall quantity, there are other factors about your assets that lenders will consider.

Some collateral may be limited in supplies, but others that have a surplus. The turnover on assets like inventory can also influence the asset-based loan rate as rapid turnover is more favorable than slower turnover. Accord has over 40 years of experience in dealing with many Candian and US companies in a variety of industries and different types of collateral. Contact us to find out if your assets qualify for an asset-based loan.

Risk 

Asset-based lending rates are affected by the risk level that the lender may be subjected to. Risk can come in a variety of forms. There is more risk with businesses that are restructuring or growing very quickly. Certain industries or business sectors are more volatile, and therefore riskier, but macroeconomics can also come into play, as a changing economy or potential recession increases the level of risk.

Asset-based loan interest rates can vary based on all these situational risk factors. Accord is experienced in dealing with a wide variety of situations and offers a broad range of solutions to address your company’s specific risks and seize opportunity.

Key Takeaways 

Asset-based lending rates will vary depending on the quality and quantity of the assets that you are putting in guarantee.

Asset-based loan interest rates can vary based on a lot of situational risk factors, so it is important to choose your lender wisely. Lenders with more experience may have a higher risk tolerance, because they have navigated many similar situations.

In asset-based lending, larger loans with quality assets and low risk will be provided with a lower asset-based loan interest rate.