questions & answers :

What is Asset-Based Lending?
Asset based loans are lines of credit secured by a percentage of eligible collateral including accounts receivable, inventory, machinery & equipment, and real property. Personal guarantees may also be required. Asset based loans are ideal for rapid growth, highly leveraged companies, mergers or acquisitions and companies who have experiences losses, but have a turnaround strategy. Companies who may not qualify for traditional bank financing or those who anticipate falling out of covenant compliance with their bank may find solutions here.
What is Factoring?
Factor financing provides immediate cash flow to businesses that assign their sales invoices to a finance company. Cash advances are nominally discounted against the invoice amount. This form of financing is prevalent among single customer, apparel and retail type businesses.
What is the cost of funds?
Typically, the cost is a prime index plus a margin of 2 to 8% (7-13% annualized). Ultimately, it is a function of the borrower’s financial position, line of credit size, strength of collateralized assets and guaranty support. Most loans have an annual facility of 1% and may have ancillary fees including float, collateral management fees and unused line fees.
What are the typical uses of funds?
Funds are typically used to cover payroll, quarterly taxes, inventory purchases, delinquent vendor accounts, paying off more expensive forms of debt, expiring lines of credit, marketing, or to fund reserves.
What’s involved in underwriting, and how long does the process take?
After an initial consultation, the borrower provides lists of resource documents. Fullcourt initiates a non-binding proposal letter outlining LOC ceiling, cost of funds, collateralized assets and duration of the credit facility, etc. Upon signature and deposit, the audit process begins. The lender will conduct an onsite review of the company’s books including a review of bank statements, A/R, A/P, inventory and equipment testing, and payroll tax filings. The audit is submitted to underwriting which creates a synopsis of the transaction. This document is submitted to the credit committee for approval. Upon approval, UCC filings are recorded. All issues are addressed and cleared with the borrower’s management. Finally, legal documents are drawn, reviewed and submitted for signatures. Funding then follows. This process can take from 2 to 6 weeks.
What documents are required?
The ‘usual package’ includes:

1. Financial Statements: Income Statements & Balance Sheets
    (Current year interim and past 2 years)
2. Account Receivable and Accounts Payable Aging
    (Current year interim and past 2 years)
3. Owner’s Personal Financial Statement (last year end)
4. Trend Report (2 year current as of today)
5. Summary Inventory Valuation Report
6. Projections (if available)
7. Debt to incumbent bank (if applicable)
Does the company have to be profitable to secure funding?
Unlike conventional commercial loans, asset-based loans are tied to the strength of the collateral. Provided the asset base remains intact, companies can do business for some period of time before returning to profitability without concern of losing their line of credit.
How is Fullcourt compensated?
We bill on success. Fullcourt is compensated by a small percentage of the overall credit facility at the time of funding. This fee is negotiated in advance and not an up-front cost to the borrower. Typically, the fees are earned and due at closing. Fees cover initial discussion, early negotiations, collection and packaging of documents and tending the underwriting process. (For pre-audit reviews and other special services, an hourly fee or project-based fee may be negotiated.)
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