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    Asset-based finance is a type of structured lending secured by business assets like accounts receivable, inventory, equipment and real estate. It provides working capital and term loans for purposes like startups, growth, acquisitions, and management buyouts. An example is purchase order financing, where a lender finances raw materials for purchase orders and is repaid from the order proceeds, charging high interest rates of prime plus 10% or more. A management buyout occurs when a company's managers and executives purchase controlling interest from shareholders to take the company private, often partnering with venture capitalists for capital. A management buy-in is when outside managers purchase an ownership stake and replace the existing management team of an undervalued or poorly-

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    Asset-based finance is a type of structured lending secured by business assets like accounts receivable, inventory, equipment and real estate. It provides working capital and term loans for purposes like startups, growth, acquisitions, and management buyouts. An example is purchase order financing, where a lender finances raw materials for purchase orders and is repaid from the order proceeds, charging high interest rates of prime plus 10% or more. A management buyout occurs when a company's managers and executives purchase controlling interest from shareholders to take the company private, often partnering with venture capitalists for capital. A management buy-in is when outside managers purchase an ownership stake and replace the existing management team of an undervalued or poorly-

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    9 views1 page

    Asset

    Uploaded by

    shivanshu-singhal-7502
    Asset-based finance is a type of structured lending secured by business assets like accounts receivable, inventory, equipment and real estate. It provides working capital and term loans for purposes like startups, growth, acquisitions, and management buyouts. An example is purchase order financing, where a lender finances raw materials for purchase orders and is repaid from the order proceeds, charging high interest rates of prime plus 10% or more. A management buyout occurs when a company's managers and executives purchase controlling interest from shareholders to take the company private, often partnering with venture capitalists for capital. A management buy-in is when outside managers purchase an ownership stake and replace the existing management team of an undervalued or poorly-

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    Asset-Based Finance

    What Does Asset-Based Finance Mean?


    A specialized method of providing structured working capital and term loans that are secured by accounts
    receivable, inventory, machinery, equipment and/or real estate. This type of funding is great for startup companies,
    refinancing existing loans, financing growth, mergers and acquisitions, and management buy-outs (MBOs) and buy-
    ins (MBIs).  

    Investopedia explains Asset-Based Finance


    An example of asset-based finance would be purchase order financing; this may be attractive to a company that
    has stretched its credit limits with vendors and has reached its lending capacity at the bank. The inability to finance
    raw materials to fill all orders would leave a company operating under capacity. The asset-based lender finances
    the purchase of the raw material, and the purchase orders are then assigned to the lender. After the orders are
    filled, payment is made to the lender, and the lender then deducts its cost and fees and remits the balance to the
    company. The disadvantage of this type of financing, however, is the high interest typically charged - which can be
    as high as prime plus 10%

    Management Buyout - MBO


    What Does Management Buyout - MBO Mean?
    When the managers and/or executives of a company purchase controlling interest in a company from existing
    shareholders.

    Investopedia explains Management Buyout - MBO


    In most cases, the management will buy out all the outstanding shareholders and then take the company private
    because it feels it has the expertise to grow the business better if it controls the ownership. Quite often,
    management will team up with a venture capitalist to acquire the business because it's a complicated process that
    requires significant capital

    What Does Management Buy-In - MBI Mean?


    A corporate action in which an outside manager or management team purchases an ownership stake in the first
    company and replaces the existing management team. This type of action can occur due to a company
    appearing undervalued or having a poor management team.

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