Raising capital is one of the most difficult challenges faced by today’s entrepreneurs.

One solution for operating businesses with hard assets involves asset based lending. These are loans against assets typically owned by a business with a verifiable financial value to facilitate participation in financial programs. These asset backed loans against specific business assets as collateral are often used to finance business growth initiatives and acquisitions. Assets that qualify include real estate, machinery and equipment, accounts receivable and inventory.

For large operating companies and legal entities seeking financing over $100 million USD, asset based financing solutions can involve a different approach. There are unique ways to monetize large balance sheet assets and secure funding.

One option involves the sale of major assets to a financing company. The financing company buyer leases back the assets to the seller in exchange for assurances of ongoing defined revenues. For example, an industrial manufacturer owns manufacturing facilities valued at over $100 million USD. They also have long term off-take agreements for their products with secure buyers. Their manufacturing facilities are sold to the financing company which leases them back to the industrial manufacturer for 10 years or more, knowing they have a secure source of cash flow to pay the lease.

Benefits to the seller of the asset include balance sheet strengthening through debt reduction and a cash infusion usable for additional developments. Additionally, sellers of the assets often continue full management and operational responsibilities over them. In some cases the seller of the asset may also be eligible for foreign direct investment credits.

This kind of financing is best suited to large operating industrial, energy and infrastructure companies world wide in stable geopolitical regions with stable currency and interest rates. For assets to qualify they should be valued over $100 million USD, be at or near 100% operational, or have less than a 24 month build.

Examples of common industries that could benefit from this kind of financing include:

  • Energy companies with major assets and long term power purchase agreement revenue in place
  • Industrial manufacturers and oil and gas companies with major assets and long term off-take agreements
  • Infrastructure projects such as ports, toll roads and airports with customer pricing agreements in place or government guaranteed annuities

Feel free to reach out and contact us about your financing needs. We serve clients across the U.S. and select international locations.

Joe Tufo
Cash Flow Specialists, Inc.
+1 925.352.6000


About the Author Joe Tufo

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