Traditional financing provides much-needed funding to advance major business projects or other tangible projects, and is especially beneficial for businesses planning months in advance. But what happens when financing is required immediately or customers have minimal experience? Asset-based financing can help clients avoid the complexities of traditional financing methods.

The challenge

Due to the strict guidelines of many lenders, the types of large commercial projects they will finance are limited. These agreements involve formal appraisals, third-party reports, and loan committee approval. In many cases, clients also need prior experience or equity partners to qualify. The approval process is long, complicated and uncertain. Business financing can also involve last-minute surprises if the bank or financial institution changes the terms or withdraws financing altogether. Even with the right assets, the project may not get approved. Worse yet, a bank can call your notes due at any time, because its lending guidelines may have changed or its investors or regulators may not be satisfied with the lender’s investment choice. This drives some clients to private investors (hard money), which presents even more challenges, including higher rates, lower LTVs (loan-to-value), shorter terms, higher fees, and increased exposure to project failure. due to external or internal factors. factors

The solution

In situations involving a commercial project or other tangible project, asset-based financing provides a much faster and more direct path to approval. Asset-based financing leverages a customer’s existing assets and, in most cases, eliminates appraisals, third-party reporting, and loan committees. In addition, this option provides greater customer privacy. Asset-based financing requires no business experience or partnership, with approval in as little as 3-5 days and accelerated financing in 30-60 days.

For example, a wealthy client of Three Dimensions Banc Corporation was trying to obtain financing for various projects (commercial real estate and other tangible assets) in the US and abroad, but was frustrated by aspects of the financing process, such as subscription and other match reports. The client was turned down for financing at the closing table even though he had a firm commitment from the lenders and had spent a lot of time and money.

When Three Dimensions told him about the unique approach to asset-based financing, the client was curious but not convinced that it was a viable solution. Three Dimensions was able to show him that the only way he would not get funds would be if the financial instrument he provided was invalid or on the watch list. With this solution, he was able to finance his projects very quickly while working on various projects. He was also able to get extended terms based on his needs, rather than following the lender’s guidelines.

To start the process, clients simply request a letter of credit (LOC), issued by an investment-rated bank. LOCs are financial instruments issued by banks that guarantee payments for a specified period, provided that the conditions of the instrument are met. The LOC, also known as a Standby Letter of Credit (SBLC) or Irrevocable Letter of Credit (ILOC), must be unconditional. Customers must also have adequate support assets. Investment-rated banks issue them directly to the customer, with qualification requirements based on the type and amount of financing.

Many developers use asset-based financing to avoid the hassle of proving the viability of their project to a traditional finance company. Because asset-based financing is leveraged against existing collateral, it’s all the support you need to close a deal.

Flexibility is another advantage. With terms based on the amount and type of financing, customers can benefit from monthly compound interest and simple interest installment payments with deferred payments and no prepayment penalties. Flexibility increases for LOCs greater than $100 million. In addition, the financial instruments are adaptable to the needs of the client. Many LOCs have an evergreen clause, which means they can be renewable, larger projects extended over time if necessary.

The biggest benefit of asset-based financing for the client is a higher LTV ratio, which can be significantly higher than that of traditional commercial financing, increasing up to 100 percent of the clients LOC face value. These higher LTVs significantly reduce the borrower’s cash-up-front requirements. When combined with expedited approval, developers have a surefire path to success.

the ideal client

Asset-based financing is ideal for large commercial entities, developers, and private equity funds, primarily those in the real estate industry or those that focus primarily on tangible assets. Hedge funds are also good candidates as they minimize project risk by using advanced investment strategies. Asset-based financing can also provide a convenient financing environment for offshore development projects. With the added privacy that asset-based lending provides, developers can now finance a wide range of projects globally that might not have been possible before.

With this exciting new approach to financing, you can now finance any project: globally, privately, without the hassles of traditional financing methods, and efficiently.