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Asset based lending

Asset based lending (ABL) is where funds are made available to a borrower secured upon an asset of the borrower. Almost any asset may be involved from the traditional “hard” assets such as machinery or equipment through to furniture and vehicles. It could even be over a valuable watch or jewellery.

If you need advice or are having problems with an asset based loan our team can help. We have years of experience of advising both lenders and borrowers, if you would like to speak us a member of the team regarding an ABL call us on 01616 966 229, alternatively please complete our online enquiry form and we will contact you directly.

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Who can use ABL?

ABL is available to individuals and businesses whether the business is a sole trader, a partnership or a limited company.

What security does the lender take?

A charge will be taken over a specific asset such as the debts owed to the borrower or a chattel mortgage over a specific piece of machinery or equipment owned by the borrower.

If the borrower is a limited company then the lender should register a charge against the company at Companies House.

If there is a pre-existing charge registered at Companies House, such as where the borrower company has a bank loan or overdraft facility, then the lender should obtain a deed of waiver and priority from the prior charge holder.

If the borrower is either an individual or a partnership, then the lender should consider registering the loan at the Bills of Sale Registry.

Valuations

Where a lender is securing the loan against a specific asset such as a piece of machinery or equipment, it is prudent for the lender to obtain a valuation of the asset based on it being a forced sale value, that is at a reduced value to its current value. The lender should not lend more that the valuation.

If the borrower does not repay the loan then how does a lender enforce its asset based loan?

By selling the physical asset.


Additional security for lender

If a lender seeks additional security then it is often in the form of a guarantee. For legal reasons any such guarantee should be by deed and should be drafted as a guarantee and indemnity.

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