Home » Loans » Business » Asset Based Lending Loan
What it is
An asset based lending loan is a loan that is secured by either residential or commercial real estate, or both, at a fixed percentage of the properties' appraised value. Such a loan is usually limited to a 50 or 65 loan-to-value ratio. For example, for a property valued at $100,000, a lender might provide between $50,000 and $65,000. Sometimes asset based lending programs even allow secondary financing.
With asset based lending loans, lenders are assuming considerable risk. Borrowers are more likely to default with this type of loan. In the event of a default resulting in foreclosure, the lender is paid based upon the sale of the assets. If the sale of the asset does not cover the loan, the borrower will have to cover any additional expenses, including past due interest on the loan, past due property taxes, lawyer's fees, and other miscellaneous credit and collection fees associated with foreclosure.
Who it's for
Asset based lending loans are typically easier to obtain for borrowers who do not conform to typical lending standards. Even those with no, little, or terrible credit can be accepted. Borrowers may also have little income to support the payments and may need to rely on the loan itself to pay the lender. Borrowers may also have little or no down payment on a large commercial purchase transaction.
What you need to do to apply
To apply for asset based lending loans, you will need to submit a completed application form along with the necessary tax returns, financials, and any pictures, drawings, maps, and brochures of the real estate that will aid in the loan process. Then, the financial institution will begin due diligence to verify all the provided information.
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