Cash Out Refinance Hard Money Loans by Asset Based Lending LLC

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Cash-Out Refinance Hard Money Loans by Asset Based Lending LLC: Unlock Capital with Asset-Based Financing

When businesses face the challenge of needing capital for growth, expansion, or operational flexibility, traditional business loans are often the first option that comes to mind. However, for asset-rich companies, there is an alternative that may be even more beneficial: Cash-Out Refinance Hard Money Loans, offered through Asset Based Lending LLC (ABL). In this blog, we'll explore how ABL works, its key benefits, and whether this type of financing could be the right solution for your business.

What is Cash-Out Refinance Hard Money Lending?

A Cash-Out Refinance Hard Money Loan is a financing option where businesses leverage their existing assets—such as real estate, accounts receivable, or intellectual property—to secure funding. Unlike traditional loans, which rely heavily on a company’s cash flow, asset-based lending (ABL) allows businesses with substantial assets to unlock capital based on the value of these assets.

ABL provides businesses with more flexibility and fewer restrictions than traditional financing methods. Companies can use a broad range of their assets, from real estate to brand names, as collateral. The advantage of ABL is its ability to offer significant funding even for businesses with fluctuating cash flow, as the loan is secured by the assets, not future cash flow projections.

How ABL Works

The process of securing an Asset-Based Loan for cash-out refinancing differs significantly from traditional cash-flow lending. Typically, lenders assess cash-flow metrics like EBITDA, cash flow, and debt service coverage ratios when approving loans. In contrast, ABL evaluates your business's assets—including accounts receivable, inventory, equipment, and even intellectual property—to determine loan eligibility.

Once your business applies for an ABL loan, the lender conducts a thorough field examination to assess the assets' value and quality. The assets that pass this evaluation are used as collateral, and an advance rate is determined based on the value of these assets. For example, in many cases, only current accounts receivable (those under 90 days) are eligible for collateral. Additionally, assets such as machinery, real estate, and inventory may also be included, depending on their value.

This process allows asset-rich companies to access capital without needing to rely solely on cash flow, which can be unpredictable, especially in industries subject to seasonal or cyclical changes.

Benefits of Asset-Based Lending (ABL)

• Access to Larger Loans
  ABL allows businesses with substantial assets to access larger lines of credit than traditional loans would permit. If your business has significant tangible assets, such as real estate or equipment, you may be able to secure more financing than through cash-flow-based lending.
• Covenant-Light Structure
  One of the significant advantages of asset-based loans is the flexibility they offer. ABL typically comes with fewer financial covenants than traditional loans. This means businesses face fewer restrictions related to maintaining certain financial metrics, like debt service coverage ratios.
• Flexibility and Control
  With an ABL loan, you can usually draw from your line of credit as needed without requiring lender approval. This can be particularly beneficial for businesses that need quick access to capital for acquisitions, expansion, or other opportunities.
• Fewer Worries About Cash Flow Fluctuations
  Traditional financing is highly sensitive to cash flow fluctuations. In contrast, ABL secures the loan based on the value of your assets, minimizing lender concerns about your company’s temporary cash flow difficulties.

Who Should Consider ABL?

While ABL may seem like an appealing option for many businesses, it’s particularly well-suited for asset-rich companies with volatile cash flows. Below are a few examples of businesses that could benefit from ABL:

1. Manufacturers – Businesses in industries like manufacturing may face fluctuations in demand, making cash flow unpredictable. For instance, a company producing commercial truck trailers may experience downturns in demand during economic slowdowns. However, they may have substantial assets—such as equipment and real estate—that can help secure a loan to ride out tough times and prepare for future growth.
2. Distributors – Companies dealing with goods that have seasonal demand (such as a wine and liquor wholesaler) often face gaps in cash flow between receiving inventory and collecting payments from customers. ABL can provide the capital needed to bridge these gaps.
3. Retailers – Retailers with significant inventory but fluctuating earnings may also benefit from ABL. For example, during the early months of the COVID-19 pandemic, retailers used ABL to fund operations, shift to online sales, and adapt to new consumer behavior.
4. Advantages Over Traditional Financing

Asset-based lending offers several key advantages over traditional financing, including:

• Fewer Restrictions
  Unlike traditional loans, which may impose strict covenants and requirements (such as maintaining certain levels of profitability), ABL allows greater freedom in how capital is used.
• Faster Access to Funds
  Traditional lenders often take weeks to approve loans. With ABL, businesses may have faster access to capital, which can be critical in times of need.
• No Prepayment Penalties
  Most ABL loans allow you to pay off the loan early without incurring additional fees, giving your business added flexibility.

What Assets Can Be Used as Collateral?

When applying for an ABL loan, businesses can leverage various assets as collateral. Here’s a breakdown of what might be eligible:

1. Accounts Receivable – This is one of the most common types of collateral in ABL loans. Only receivables that are under 90 days old (or up to 60 days past due) are typically considered.
2. Inventory – Inventory that is in good condition and can be easily sold may also serve as collateral.
3. Machinery & Equipment – If your business owns valuable machinery or equipment, this can be used to secure a loan.
4. Real Estate – Commercial property, office buildings, or warehouses can also be valuable assets for securing an ABL loan.
5. Intellectual Property – In some cases, valuable intellectual property like trademarks or patents may be considered collateral.

What Assets Are Not Suitable for ABL?

Not all assets are suitable for asset-based lending. For example, construction companies may face challenges in securing loans with accounts receivable that are difficult to collect due to progress billings or retention. Similarly, highly specialized inventory, such as products customized for specific customers, or perishable goods, may not qualify for ABL.

Simplified Reporting Process

While ABL loans do require regular reporting on the status of collateral, Bank of America Business Capital has streamlined the reporting process with an automated tool. This tool allows borrowers to easily upload their financial data, reducing the burden of paperwork and simplifying the process.

Is ABL Right for Your Business?

If your business has significant assets but experiences fluctuations in cash flow, Cash-Out Refinance Hard Money Loans through asset-based lending could be an excellent option. Whether you need working capital, are planning to expand, or simply need more flexibility to navigate cash flow fluctuations, ABL provides an alternative to traditional financing methods.

If you think asset-based lending could be a good fit for your business, consider consulting with a financial advisor or an Asset Based Lending LLC specialist. They can help you evaluate your company’s assets and determine if ABL is the best financing option for your needs.

Requirements and details 

Asset Based Lending LLC – Cash-Out Refinance Hard Money Loan Program

• Experience: Any
• Credit Score Minimum: 660
• Interest Rate: 11%–15%
• Points: 0–2%
• Advance Rate on Rehab: 100%
• Loan-to-Value (LTV): Up to 67.5%
• Property Types: Single Family, Multi-Family, Mixed Use
• Pre-Pay Penalty: No
• Extensions: Available
• Blanket Loans: Yes
• Loan Size: $100K – $10M
• Loan Terms: 12 months

This information is sourced from Asset Based Lending LLC's official website.

For more details, visit Asset Based Lending LLC's official page on Cash-Out Refinance Hard Money Loans.

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