An asset-based lender's emphasis on assets rather than cash flow makes a significant impact on the relationship between lender and borrower, according to Barnett.
The asset-based lender is taking a so-called security position in the underlying assets and views liquidation of them as a viable means of recovering the loan principal. In addition, because the asset-based lender is lending against assets, which can rapidly fluctuate in value, it monitors these assets more intensively. "It's not uncommon for asset-based lenders to look at a company's inventory or accounts receivable once a month, sometimes even more frequently," says Barnett. Conventional lenders making term loans, on the other hand, might review financial data just once a quarter and never look at inventory after the initial loan is made.