Loan Assets
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From Wikipedia, the
free encyclopedia An asset-based
loan is a loan, often for a short term, secured by a company's assets. Real
estate, accounts receivable (A/R), inventory, and equipment are typical
assets used to back the loan. The loan may be backed by a single category of
assets or some combination of assets, for instance, a combination of A/R and
equipment. |
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Loan terms
Percentage of appraised value
Asset based lenders typically limit the loans to a 50 or 65 loan to value
ratio or "LTV". For example: If the appraisal is valued at $1,000,000.00 a
lender might lend between $500,000.00 and $650,000.00.
A borrower is more likely to default with little or no down payment, and has
little invested, making it easier to "walk away" from the deal if it does
not go well. In the event of a default resulting in a foreclosure, the first
lien position lender is entitled to repayment first, out of the proceeds of
the sale. Exceptions may occur in the event of a "short sale", where the
property is overvalued and actually sells for less, and does not cover the
loan. The lender can than sue the borrower for the remaining balance if it
can be obtained. An asset-based lender knows that and usually will feel
content that at an average 60 LTV they have enough equity to use to cover
any expenses incurred in the event of a default.
These expenses would include:
* Past due interest on the loan they have given
* Past due property taxes on the property if the borrower has stopped paying
them also
* Lawyer's fees
* Miscelleneous credit and collection fees associated with foreclosure.
Secondary financing
Allowing secondary financing is common on asset based lending programs.
Asset based lenders may allow this, if they are content with the amount of
equity remaining beyond their lien position (often first).
Some asset-based lenders will allow a second mortgage from another lender or
seller to occur up to the full amount of the property's value, while others
may restrict secondary financing to a specific Combined Loan To Value or "CLTV".
For example while they may lend at a 50 Loan to Value Ratio of the property
value, they may allow secondary financing from another party for up to the
full value, otherwise stated as 100 Combined Loan To Value Ratio. They may
in some cases require that the borrower have at least 5% or more of their
own funds, which would be expressed as a CLTV of 95. That would allow for up
to 45% of the value to be financed by a secondary lender. The secondary
lender is at a higher risk. A seller might take the chance in order to
facilitate the sale of his property quickly and/or at full price.
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More related links about
Loan Assets
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Downloadable (with restrictions)! A defining characteristic of bank
loans is that
they are not resold once created. Yet, in 1989 about $240 billion of
...
ideas.repec.org/p/nbr/nberwo/3551.html
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8 Jan 2010 ... View the Commercial
Loan Officer -
Special Assets
Management job opportunity at First State Bank & Trust in Tonganoxie, KS
on LinkedIn.
www.linkedin.com/jobs?viewJob=&jobId=821940
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Free Online Library: Most
assets: all
student loan
jumps into originations.(LA's Non-Profit World--Where The Money Goes) by
"Los Angeles Business Journal"; ...
www.thefreelibrary.com
› ... ›
January 3, 2005 -
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Kamletlaw.com, Kamlet Reichert, law firm
in Colorado,
www.kamletlaw.com/PracticeAreaPage.aspx?...LoanWorkoutsandDistressedAssetandDebtTransactions12218...
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24 Dec 2009 ... BY) said Thursday
it has agreed to buy the commercial-vehicle and construction-equipment
loan assets of
General Electric Co. ...
www.nasdaq.com/.../stock-market-news-story.aspx?...loan-assets...
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