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Frequently Asked Questions

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What's the difference between asset-based lending and traditional bank financing?

The primary difference between asset-based lending and commercial bank financing is what the lender looks to first for repayment of a loan.  A bank will look first to the cash flow for the repayment, then to collateral.  An asset-based lender looks to collateral first.  Since banks underwrite cash flow as their primary repayment source, they typically require less collateral controls and monitoring but more financial covenants. For "asset rich" companies, an asset-based loan may make more funds available because it is not based strictly on the anticipated levels of cash flow.  Additionally, the structure often requires fewer covenants, providing more flexibility for many borrowers.

As a reminder, an asset-based loan (ABL) is secured by a company's accounts receivable, inventory, equipment, and/or real estate, whereby the lender takes a first priority security interest in those assets financed.  Asset-based loans are an alternative to traditional bank lending because they serve borrowers with risk characteristics typically outside a bank's comfort level. Asset-based loans offer flexible financing solutions for: working capital, acquisition's, turnaround financing, capital expenditures, Debtor-in-possession (DIP), growth financing, recapitalization's, refinancing or restructured financings, management buyouts or leveraged ESOP's (Employee Stock Ownership Plan).

Regardless of the assignment, Lexington provides full-service placement capabilities to lower and middle-market companies and we structure complex transactions across the broad capital spectrum.