What is the range percentage of rates and fees charged by asset based lenders?

I see this question was asked back in May, so it would be interesting to hear how your experience went as far as real answers to your question.

For the benefit of U.S. Focus readers, Asset Based Lenders provide commercial financing to companies primarily using accounts receivables as collateral. A $4- $5 million dollar ABL line probably means the borrower has around $5 - $6 million dollars in available AR for funding. This means the creditworthiness of the account debtors (customers) is strong and diversified (not concentrated in one or a few customers.)

In this credit market there is strong competition for a loan this size, so a company can leverage it to get a good deal. The fees begin at the very start - non-refundable due diligence application fee. This can run anywhere from $1,000 to $10,000 - a big spread which has a lot to do with how much legal work will be required to close the loan. If there is significant "hair" as the lenders call a deal with problems, then the application fee is higher than lower.

The application process produces a term sheet which identifies the rates and terms of the actual loan. Again an ABL like this would probably have a one time origination fee - from .25% up to 1.5% of the loan amount paid at closing. Then there would be a "service fee" which is another .25% to 1.5% of your total available AR paid monthly. On top of that would be your "interest charge" which is an ongoing daily interest charge for "funds in use," meaning whenever you draw on the credit line the outstanding balance accrues interest charges.

Then there are 4 times a year onsite audit charges, cancelled checks, wire fees, a whole host of little charges you need to ask about.

At the end of the day you are looking for the "all in" cost of borrowing money. Since each ABL lender structures their deal uniquely, the - all in - is the best way to compare what you are getting. On an annualized basis a strong deal with good credits and clear history will run in the high single digits up to the low teens percentage wise. A deal with lots of problems (unpaid taxes, old loans to pay off, complicated ownership etc) can run into the high teens up to low twenties annualized interest rate.

Lastly, in working with lenders - rate isn't the end all be all. Make sure that the working relationship is congruent with how you operate. Wild demands can cast you far afield and just add stress and complications to your life - but hey, the rate was cheap!