Asset-Based Lending: A Primer

Back to the mortgage loan example - the house is worth $400,000. Since the borrower's down payment was $80,000, the loan amount is $320,000. [...]the borrower has paid 20% into the home, thus the lender is approving a loan only up to 80% of the house's value. Key Takeaways * The goal is to make loans, earn interest, and have the loan repaid in full. * There is an inverse relationship between a borrower's creditworthiness and the lender's need for collateral. * Lenders must analyze the borrower's financial condition and historical operating performance. * Lenders should aim to understand the nature and value of assets serving as collateral. * Monitoring asset levels is important and is a mechanism to help to maintain a safe loan-to-collateral ratio. * A strong working relationship with a borrower is critical to understanding their business and their borrowing needs. [...]one industry icon started off in social work.