What new loans are available to businesses?
One new loan that has become more prevalent in Central Ohio is an asset-based loan. The lender will agree to advance funds based on specific assets owned by the company, primarily accounts receivable and inventory. The total amount that can be borrowed is determined based on applying the advance rate, which is a percentage usually between 40 to 70 percent, to the amount of qualifying accounts receivable and inventory. Both the advance rate and what are qualifying accounts receivable and inventory are specified in the loan agreement. The lender will require periodic verification of these assets, since the loan is tied directly to these balances and accounts. One of the bank’s internal auditors or sometimes a third-party auditor will perform certain tests to verify the accuracy and completeness of the qualifying accounts receivable and inventory. This type of loan is generally used for manufacturing companies but can also be used for service companies with a sizeable amount of accounts r
