Asset Based and Specialty Finance for Operating Companies and Lenders

Asset based and specialty finance structures capital around identifiable financial or physical assets rather than relying only on corporate EBITDA. Receivables, inventory, equipment, loan portfolios and other eligible assets can become the basis for revolving facilities, warehouse lines, portfolio financing and securitization.

This creates financing options for operating companies with valuable working capital assets and for specialty lenders that need institutional capital to fund portfolios they originate.

Financely provides paid advisory and placement work across asset based lending, borrowing base facilities, specialty finance and warehouse structures.

What Asset Based Finance Means

This differs from a pure cash flow loan where debt capacity is primarily sized against EBITDA and enterprise cash generation.

Financely's guide to borrowing base asset based lending covers the core mechanics used to calculate availability.

Borrowing Base Financing

A borrowing base facility does not simply establish one fixed loan amount.

Availability is calculated from eligible collateral. A lender may advance a percentage of eligible receivables plus a different percentage of eligible inventory and then deduct reserves.

Receivables and Inventory Financing

A company can have strong sales while still facing a significant funding gap between paying suppliers and collecting customers.

A borrowing base facility against receivables and inventory converts part of those working capital assets into borrowing capacity.

Financely's inventory finance and borrowing base facility coverage addresses structures where inventory forms a material part of lender collateral.

Advance Rates and Eligibility

The face value of an asset is not normally equal to its borrowing value.

A lender applies an advance rate after determining which assets qualify.

Warehouse Facilities for Specialty Finance Companies

Specialty finance companies have a different problem from ordinary operating companies.

They originate financial assets such as loans, leases or receivables and need capital to fund those assets before they are repaid, sold or securitized.

A warehouse facility for a specialty finance company can provide revolving institutional debt against an eligible portfolio.

Financely's warehouse line advisory for specialty finance addresses this type of financing.

How a Warehouse Facility Works

Financely also maintains a dedicated page for warehouse financing for private lenders and debt funds.

Whole Loan Financing

An originator does not always need to retain every asset it creates.

Whole loan sales allow an investor to purchase complete loans or defined pools. This transfers funded assets away from the originator and can recycle capital into new production.

The arrangement can be episodic or form part of a repeat institutional program.

Forward Flow Agreements

A forward flow arrangement goes further by establishing a framework under which an investor agrees to purchase qualifying future originations that satisfy defined eligibility criteria.

For an originator, this can create predictable capital takeout. For the investor, it creates access to recurring asset production.

Financely's forward flow and whole loan sale advisory covers these structures.

Warehouse to Securitization

A warehouse facility can serve as an aggregation stage rather than the permanent financing source.

An originator builds a sufficiently large pool and can later refinance the warehouse through an asset backed securities transaction or another term financing structure.

This warehouse to term model is especially relevant where the originator expects recurring asset production and wants to reduce reliance on permanent balance sheet capital.

Financely also covers receivables securitization setup for eligible programs.

Asset Based Lending vs Cash Flow Lending

Cash flow lenders primarily ask whether enterprise earnings can support debt.

Asset based lenders ask what eligible collateral exists, how quickly it converts to cash and how much can safely be advanced against it.

A company with thin EBITDA but a high quality receivables portfolio can therefore look very different to an asset based lender than to a conventional cash flow lender.

Financely provides a dedicated comparison through asset based versus cash flow lending.

Specialty Finance Capital for Nonbank Lenders

Nonbank lenders need to finance the assets they originate without funding every loan entirely from shareholder equity.

The capital stack can evolve from sponsor equity to a warehouse facility and ultimately to whole loan sales, forward flow or securitization.

Financely's specialty finance guide covers the broader market and financing model.

How Financely Approaches Asset Backed Mandates

Financely starts by identifying the asset, obligor, historical performance, expected cash flow and legal ownership structure.

For an operating company, this may mean reviewing receivables, inventory and existing liens.

For a specialty lender, analysis can include originations, portfolio performance, defaults, recoveries, concentrations, servicing and expected future production.

The objective is to determine whether the requirement is best addressed through an asset based revolving facility, warehouse line, whole loan program, forward flow structure or securitization.

Frequently Asked Questions

Important. This material is for general information only and does not constitute legal, tax, investment, regulatory or credit advice. Asset eligibility, advance rates, security, true sale treatment and securitization requirements depend on the transaction and applicable law. Financely provides corporate finance advisory and arranging services. Financely is not a bank or direct lender and does not guarantee financing approval or completion.