Asset Based Lending is based on the assets of your business which serve as the collateral for your loan, assets such as inventory, receivables and equipment.

You create a receivable, as you invoice, when you ship a product or something you produce or sell to a third party. In financing receivables, it is much easier to finance invoices for goods and/or services sold to other businesses, rather than the consumer. When you are selling to the consumer, banks expect you to take a check, cash or credit cards. If you are accepting payment using credit cards, etc., and you still need some operating capital, yes, Blue Water may be able to help you.

On the other hand, if you are shipping product or providing services to businesses, then this offers another financing possibility that is likely to be less expensive to you business.  Not only is it cheaper, we may be able to add an inventory loan to your financing structure, which can also save costs for your business.

I would like to address what I call “Small Business Lending”. Please remember that different banks specialize in different type of loans.  You may have been reading in the newspapers where you saw articles saying how stable the small community banks are in today’s economy. That is largely true because they did not try to do everything for everybody. Rather, they lent money to people to buy cars and homes to live in. They did not do a lot of commercial loans nor did they lend outside their own areas, areas which were well known to them. In fact, bank in many cities would not lend on the other side of the town where the bank was originally established.  Is this red lining? Yes it is, but they were not trying to grow beyond their own home office so certain laws would not apply to them.

Furthermore, these banks did not do business loans unless the business had good strong collateral and most of the banks would not loan on equipment as “normal” collateral.

Of course, we all know that the equipment you have sitting in your store, plant or office has real value to it.  What is it worth?  Depends on a multitude of factors, including costs, condition of the equipment, how much money you make with the equipment and what type of equipment it is. Mining oil drilling equipment may be 20 years old but everything on it is new and had been replaced so it has a much higher value than something that has not been taken care of or is replaced every three years like a laptop computer. How do you treat software and what is the value? Same thing applies as in today’s world the software designs, makes and schedules production as much as the old machines use to do.

For example, if you are making wood pallets and selling them to companies that make and ship appliances when does the lumber that makes the pallets become inventory? Is the lumber laying, that is to say, in your possession, in the year of the inventory? If it is, the lumber is included in your inventory as “raw material”. Raw material is very hard to borrow against.  However once that lumber has been made into the pallets, called “Finished Goods”, or even if some work has been done but they are not completed, called “Work-in-Progress” inventory loans become more practical.

Another example relates to what happens if you have a “Purchase Order” of “PO” to produce or supply some goods or service for a major corporation or a government, can you I borrower based the purchase order? Of course you can.  It is not cheap money, but we can arrange for you to have the money to, lets say, purchase the parts needed to build the goods you are providing for delivery against the PO.  And, after the item is built and shipped your effective rate drops because it now becomes a receivable loan and is no longer a purchase order loan, because the closer to the payment, the less costly is the borrowing rate.