Private Credit has and will continue to be a natural buyer for these assets, likely in the form of straight asset acquisitions or more bespoke structured solutions agreed on a bilateral basis. Regions where housing market fundamentals are positive and yet pockets of demand-supply imbalance exist are interesting investment opportunities. Alicia Tuovila is a certified public accountant with 7+ years of experience in financial accounting, with expertise in budget preparation, month and year-end closing, financial statement preparation and review, and financial analysis. The industry has significantly evolved and institutionalized over the last decade with the imposition of regulation promoting transparency and consumer protections. Specialized strategy pursuing new and mispriced lending opportunities and opportunity to negotiate towards potential origination premiums, excess spreads, and equity upside of ownership in lending platforms. There is no assurance that such events or targets will be achieved, and may be significantly different from that shown here. 
document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); This website uses cookies. Asset-based lending, also known as asset-backed finance, ABL lending or an asset-based loan, provides your small or medium-sized business with fast, flexible financing to optimize cash flow, avoid draining savings accounts and effectively manage critical transitions. Foremost among these factors was the collapse of securitization markets triggered by the credit contagion from subprime U.S. mortgages and exacerbated by the subsequent run on liquidity. You can borrow up to 85 percent, or potentially more, against your outstanding eligible accounts receivable and borrow as needed. It also includes financing secured against financial contracts typically in the insurance and asset servicing sectors, where KKR Credit has made an investment. Unlike corporate credit, which is typically dependent on the performance and enterprise value of a single borrower, cash flow performance of large, diversified pools of underlying hard and financial assets drive ABF returns. KKR Credit currently conducts its activities through the following advisory entities: KKR Credit Advisors (US) LLC, which is authorized and regulated by the SEC, KKR Credit Advisors (Ireland) Unlimited Company, which is authorized and regulated by the Central Bank of Ireland, and KKR Credit Advisors (EMEA) LLP, which is authorized and regulated by the Financial Conduct Authority. The line of credit is then paid down overtime by collecting on inventory and outstanding receivables. While the economic and social risks linked to COVID-19 today are high, we view ABF as a large, diverse asset class that has been tested over a long history and as the environment normalizes, has the potential to offer investment exposure in interesting and often proprietary investments. KKR Credit gained comfort with this opportunity given LAF is this banks core business and its most profitable one. When it comes to providing an asset-based loan, lenders prefer companies with not only strong assets but also well-balanced accounts. AVP - Government Contracting and Asset-based Lending, AVP - Government Contracting and Asset-based Lending. The aircraft operating lease market includes $60 billion of re-leasing activity and $60 billion of new leases on OEM deliveries every year, for a total of $120 billion14. Its crucial that you understand your financing options so you can land on the product that best suits your business and its capital needs. Downside protection is another potential benefit as the investment manager can proactively adjust the underwriting strategy and origination pace to shape the asset pool through market cycles.
The company has purchased and manages more than $4 billion worth of homes and has served over 12,000 customers. Investments backed by cash flow producing assets such as intellectual property, royalty streams and customized financial contracts fall within this eclectic segment. The data and information presented are for informational purposes only. Sources include IHS Markit, data for NACE Rev.2 Division 77 Rental and leasing activities.. Our deep knowledge and product expertise help us match you with the best solution to meet your unique needs. However, larger corporations do use asset-based loans from time to time, usually to cover short-term cash needs. Result: Since 2016, KKR has purchased four Spanish and one Portuguese non-performing loan portfolios, totaling over 2.4 billion in aggregate outstanding balance that is being managed by our captive servicer. I was hooked!
We are proactive to provide top-notch service. Asset-based lending is the business of loaning money with an agreement that is secured by collateral that can be seized if the loan is unpaid. Investment Approach: Rather than purchase settled policies in the open market, KKR Credit formed and capitalized a capital vehicle with one of the leaders in the life settlements industry. Up to 90% of eligible Accounts Receivable, Credit reviews for new and existing account debtors, Receivables support allows you to focus on your core business. Investment Approach: To harness the opportunity set in a meaningful way, KKR recognized the need for a captive aircraft servicing platform. Through our research, we learned that more than ~$100 billion worth of insurance policies lapse each year with no financial benefit to policyholders. Cash Flow vs. Asset-Based Business Lending: Whats the Difference? SouthStar Capital will establish a revolving line of credit (revolver) to maximize the availability of working capital from the companys asset base. Asset Based Funding is used by companies that need working capital to operate or grow, in some instances these businesses may have reached the limit on their bank line of credit. The size of your asset-based loan is calculated on a percentage of the combined value of your accounts receivable, inventory, equipment, and in special circumstances, real estate. As long as customers continue to make payments as they always have, we use those payments to reduce your loan balance. This, in turn, has allowed us to create a virtuous cycle by driving down funding costs and thereby provide even better terms to these originators. As the borrower manufactures or acquires new inventory, and as they generate receivables from sales, these new assets become available for inclusion in the borrowing base. As global economies eventually emerge from the COVID-19 pandemic, we expect the rebound in demand for credit to be met by renewed constraints on the banking system that will stem from growing non-performing loan balances and renewed scrutiny and calls for restraint from regulators. Structured investments are typically developed in conjunction with a bank or asset manager seeking a specific solution. We can provide your small business with flexible working capital financing solutions, including both accounts receivable and inventory. 4 Steps to Getting a Small Business Loan Without Collateral. Asset Based loans can be structured as revolving credit facilities, allowing a company to borrow from assets on an ongoing basis to cover expenses or investments as needed. The disadvantage of this type of financing, however, is the interest typically charged, which can be as high as prime plus 10%. The illustration below is an example of a regulatory capital relief trade for a bank: Investment managers generally pursue ABF through either a niche-asset class approach or broad, multi-asset class approach. Market Opportunity: European and Asian banks are still estimated to have approximately $65010 billion and $64011 billion, respectively, of NPLs languishing on their balance sheets, even 12 years after the Financial Crisis. Investment Approach: As we performed diligence on the sector, we evaluated partnering with existing originators to build immediate volume but feared we would suffer with a heterogeneous loan portfolio and lack of underwriting control. The advantages of the ABF investment strategy is strengthened by diversity, asset security, negotiated terms, and short duration of many of the underlying loans. 2022 Crestmark , a division of MetaBank, N.A. 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 company currently acts as a servicer of approximately 500 lease contracts that have been syndicated to other investors. The rates on asset-based loans vary greatly from one transaction to the next. This approach, while more involved and operationally complex, enables KKR Credit to tap a primary source of market information and access policies at wholesale prices. Historically, our platform has originated on average $2 billion in loan volumes annually, making it the largest capital provider in this market. Banks seek the exposure transfer with the goal of enhancing Tier I capital buffer (mainly in Europe) or transferring credit risk (mainly in the U.S.). Asia The region encompasses the two largest non-bank economies in the world, India and China, which should rebound following a period of post-growth consolidation. Result: Since closing the investment in mid-2019, KKR has deployed $120 million of capital, representing approximately $475 million in face value of policies across both strategies. The spread of COVID-19 and government-imposed restrictions have created unprecedented near-term uncertainty in the aviation market. Excludes loans securitized or sold to agencies and assets acquired in capital markets or via other secondary/ syndicated channels. Our experienced team will create a unique financing plan to help you and your business thrive. Asset Based Lending facilities help companies manage their rapid growth issues and position them in a favorable position for future growth. Employees of KKR Credit Advisors (US) LLC, and KKR Capital Markets LLC located in the United States are dual employees of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, KKR).General discussions contained within this presentation regarding the market or market conditions represent the view of either the source cited or KKR Credit. She is an expert in personal finance and taxes, and earned her Master of Science in Accounting at University of Central Florida. The views expressed reflect the current views of the Private Credit Team as of the date hereof and neither the Private Credit Team nor KKR undertakes to advise you of any changes in the views expressed herein. Given the businesss capital intensive nature, KKR was able to support the company through additional capital investments in different forms (e.g., term loans, secondary equity raise, private REITs) at each stage of its growth over multiple years. KKR maintains control over the underwriting quality and audits its compliance policies and procedures. All rights reserved. Access to the benefits of (i) privately negotiated transactions where lenders often maintain an upper hand due to a less competitive market, (ii) investments backed by large diversified pools of hard and financial assets, (iii) short duration of many of the underlying loans. Patrick is the general manager for Live Oak Bank's Government Contracting and Asset-based Lending divisions. This allows your company to turn its assets into working capital and access flexible funding quickly. Asset-based financing is a way for companies to use property, inventory, or accounts receivable as collateral to obtain a loan. Find out what our clients are saying about Asset Based loans with SouthStar Capital. 13 Source: Estimates based on PWC Portfolio Advisory Group projections. Asset-based lending may be a line of credit or a cash-funded loan, but either way, the loan money is secured by some sort of collateral from the borrower's business or properties, such as inventory or accounts receivable. When the borrower needs additional working capital, they request an advance, and the capital is sent directly to the borrowers bank account. Therefore, factoring is technically a type of asset-based financing, where the business receivables act as the asset to secure funding from the lender. KKR and its affiliates may have positions or engage in securities transactions that are not consistent with the information and views expressed in this material. This experience equipped him with leadership and team-building skills which have aided him in his professional endeavors. Fix and Flip lending generates between $15 and $25 billion of new volumes annually across the U.S. generating low double-digit annualized yields with average maturities under one year9. In contrast to an unsecured loan, asset-based financing is not constrained by financial ratios or covenants based on credit score or credit history, so you can typically borrow more through ABL lending than traditional personal loans or credit lines, even if you have a strong credit report. Life settlement providers advance a meaningful portion of the policys value to the holders which far exceeds their other options. Control your cost of capital by only using our ABL services when needed, More access to capital than a traditional line of credit. Weaker market participants will likely be forced to contract their lending activity due to inadequate capitalization or inability to secure asset financing from risk-averse banks who will likely refocus their attention on the largest, most established operators.
Result: Although a more recent investment, the vehicle has already financed eight transactions generating an unlevered, high single-digit annual yield, a blended 62% LTV, and modest underlying leverage (below 4.5x Debt/EBITDA) of the corporate borrowers16. Our team is dedicated to streamlining the entire asset-based lending process, from due diligence, loan approval and funding to onboarding, daily service and renewal/graduation.
Member FDIC. Leveraging the team and tech-focused platform, the goal is to start disintermediating existing broker channels and providing a direct-to-consumer offering that substantially reduces cost of customer acquisition and delivers highly attractive product economics. After the lender receives payment, he then deducts the financing cost and fees and remits the balance to the company. We expect to see increased velocity of bank balance sheet assets as they continue to originate new loans for relationship and fee considerations (while transferring risk to third parties), a further shift to non-bank lenders where capital requirements are lower and banking consolidation/restructuring. Accords asset-based lending is ideal for a wide variety of industries across the United States and Canada. The information in this presentation may contain projections or other forward-looking statements (which can be identified by the use of forward-looking terminology such as, but not limited to, "may," "will," "should," "seek," "expect," "target," "intend," "estimate," "believe," or other variations thereon or comparable terminology) regarding future events, targets or expectations regarding the Funds or the strategies described herein, and is only current as of the date indicated. Find out the key differences that set Asset Based Lending apart from Bank Financing. The creation of a platform is typically done in partnership with a deeply experienced management team with subject matter expertise in an industry. By pursuing new and mispriced lending opportunities, the underlying investments can deliver risk and return profiles that are differentiated from other types of private credit. Asset-based loan financing may be used by companies that need short-term working capital to keep day-to-day operations, like payroll, for example, up and running. The borrower then grants SouthStar a security interest in the items being used as collateral, such as Accounts Receivable, Equipment and Inventory. Result: Since KKRs involvement, the company has grown to become a major participant in the SFR market, enlarging rental markets in the U.S. where little or no high quality rental units were previously available. Result: Since closing the investment in late 2018, KKR has purchased, or agreed to purchase, approximately $1.7 billion worth of aircraft assets on lease to a variety of leading airlines across the globe. And our word is our bond, when we say well do something, its as good as done. Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. The total value of the global commercial aircraft fleet in operation in 2019 was $870 billion and each original equipment manufacturers (OEMs) deliver approximately $140 billion of new aircraft.
Our experienced team will work with your business to optimize availability and affordability with the right ABL product. We can also lend against inventory at competitive advance rates. While more complex, investing in a platform can have long term benefits such as above market yields that are protected from erosion by barriers to entry, equity upside potential through warrants in the business, and uncorrelated returns. Asset-based finance lenders tend to favor liquid collateral that can be easily turned into cash if a default on the loan occurs. To identify and assess ABF investment themes and their related opportunity sets, KKR leverages the intelligence and data gathered from around the Firm, including more than one hundred private equity portfolio companies and one thousand traded credit holdings, in areas such as global macro-economics, demographic and industrial trends, and new technology. A value is given to each asset, and a percentage of the value of the asset is made available to the borrower as a line of credit. 11 Source: Deleveraging Asia, Deloitte, September 2019. Whether your business is looking to maximize growth opportunities or manage a successful turnaround, asset-backed financial products provide maximum flexibility, especially in the following circumstances: Asset-based lending works just like a revolving loan, which means its available when you need it, and you can pay it down whenever you choose.
Investment managers typically source portfolio acquisitions through bank or finance company contacts, both proactively and on a reverse inquiry basis. None of KKR Credit Advisors, the Funds, the general partner of the Funds or any of their respective affiliates or employees have updated any such information through the date hereof or undertaken any independent review of such information, nor have they made any representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of any of the information contained herein (including, but not limited to, information obtained from third- party sources) and they expressly disclaim any responsibility or liability therefore. Top Three Benefits of Asset-Based Lending, Line of credit from $3 million to $35 million, Company or industry that is working capital intensive, Quality account debtors superior to the companys profile, Businesses that have an inventory with quality value, Turnarounds: when cash flow debt service coverage, predictability or high leverage (debt/EBITDA) does not support cash flow financing, Businesses seeking to expand borrowing capacity, Competitive AR and inventory advance rates for bulk followed line of credit, Advance rates up to 90% (accounts receivable) and competitive for inventory. However, banks retreat over the past decade has had an equally profound impact on non-corporate activity, a segment that comprises a far larger portion of the global capital markets and real economy. Of course, a multi-asset approach requires that managers have a large, well-resourced global platform with investment and structuring expertise plus operations and financing resources.
However, we believe investing in the highest-quality aircraft assets on lease to top-tier airlines allows for attractive returns even if air travel remains depressed for a prolonged period of time. However, these loans do have lower interest rates than unsecured loans because of the loan's collateral that allows the lender to recoup any losses if the borrower defaults. As an investment strategy, Asset-Based Finance invests in directly originated assets that derive returns from recurring, often contractual, cash flows. Result: Today our platform manages over 700 million in assets across 83,000 loans, generating an average annual interest rate in the high teens from borrowers across the credit spectrum8. 6 KKR may use some or all of the themes described.
In 2019, approximately 10 billion of European tranches were placed with investors. Investment Approach: One example of a regulatory capital trade is a transaction we completed with a bank in northern Europe seeking a credit risk transfer in the form of a credit linked note referencing loans originated by the banks European and U.S. Market Opportunity: Regulatory Capital trades (or Capital Relief trades) are typically defined as synthetic securitizations through which banks transfer the risk of a reference pool of credit exposures to non-bank investors. In the following pages, we present information about each Segment and illustrate specific examples of investments that KKR has made in each one7. ABL gives your company the flexibility it needs to grow, recapitalize, take advantage of supplier discounts, buyout shareholders, or even to fund payroll. Other names for the asset-based finance industry are commercial finance and asset-based lending. In addition, we expected that the subordination structure and excess spread would provide downside protection and mitigate losses. In addition, the views expressed do not necessarily reflect the opinions of any investment professional at KKR, and may not be reflected in the strategies and products that KKR offers. Much like leveraged lending is to corporates, ABF is the life blood of millions of businesses and consumers globally financing day-to-day operations and lives through mortgages, credit cards, receivables financing, consumer installment loans, automobile financing, and equipment leasing, to name a few.
document.getElementById( "ak_js_2" ).setAttribute( "value", ( new Date() ).getTime() ); This website uses cookies. Asset-based lending, also known as asset-backed finance, ABL lending or an asset-based loan, provides your small or medium-sized business with fast, flexible financing to optimize cash flow, avoid draining savings accounts and effectively manage critical transitions. Foremost among these factors was the collapse of securitization markets triggered by the credit contagion from subprime U.S. mortgages and exacerbated by the subsequent run on liquidity. You can borrow up to 85 percent, or potentially more, against your outstanding eligible accounts receivable and borrow as needed. It also includes financing secured against financial contracts typically in the insurance and asset servicing sectors, where KKR Credit has made an investment. Unlike corporate credit, which is typically dependent on the performance and enterprise value of a single borrower, cash flow performance of large, diversified pools of underlying hard and financial assets drive ABF returns. KKR Credit currently conducts its activities through the following advisory entities: KKR Credit Advisors (US) LLC, which is authorized and regulated by the SEC, KKR Credit Advisors (Ireland) Unlimited Company, which is authorized and regulated by the Central Bank of Ireland, and KKR Credit Advisors (EMEA) LLP, which is authorized and regulated by the Financial Conduct Authority. The line of credit is then paid down overtime by collecting on inventory and outstanding receivables. While the economic and social risks linked to COVID-19 today are high, we view ABF as a large, diverse asset class that has been tested over a long history and as the environment normalizes, has the potential to offer investment exposure in interesting and often proprietary investments. KKR Credit gained comfort with this opportunity given LAF is this banks core business and its most profitable one. When it comes to providing an asset-based loan, lenders prefer companies with not only strong assets but also well-balanced accounts. AVP - Government Contracting and Asset-based Lending, AVP - Government Contracting and Asset-based Lending. The aircraft operating lease market includes $60 billion of re-leasing activity and $60 billion of new leases on OEM deliveries every year, for a total of $120 billion14. Its crucial that you understand your financing options so you can land on the product that best suits your business and its capital needs. Downside protection is another potential benefit as the investment manager can proactively adjust the underwriting strategy and origination pace to shape the asset pool through market cycles. The company has purchased and manages more than $4 billion worth of homes and has served over 12,000 customers. Investments backed by cash flow producing assets such as intellectual property, royalty streams and customized financial contracts fall within this eclectic segment. The data and information presented are for informational purposes only. Sources include IHS Markit, data for NACE Rev.2 Division 77 Rental and leasing activities.. Our deep knowledge and product expertise help us match you with the best solution to meet your unique needs. However, larger corporations do use asset-based loans from time to time, usually to cover short-term cash needs. Result: Since 2016, KKR has purchased four Spanish and one Portuguese non-performing loan portfolios, totaling over 2.4 billion in aggregate outstanding balance that is being managed by our captive servicer. I was hooked!
We are proactive to provide top-notch service. Asset-based lending is the business of loaning money with an agreement that is secured by collateral that can be seized if the loan is unpaid. Investment Approach: Rather than purchase settled policies in the open market, KKR Credit formed and capitalized a capital vehicle with one of the leaders in the life settlements industry. Up to 90% of eligible Accounts Receivable, Credit reviews for new and existing account debtors, Receivables support allows you to focus on your core business. Investment Approach: To harness the opportunity set in a meaningful way, KKR recognized the need for a captive aircraft servicing platform. Through our research, we learned that more than ~$100 billion worth of insurance policies lapse each year with no financial benefit to policyholders. Cash Flow vs. Asset-Based Business Lending: Whats the Difference? SouthStar Capital will establish a revolving line of credit (revolver) to maximize the availability of working capital from the companys asset base. Asset Based Funding is used by companies that need working capital to operate or grow, in some instances these businesses may have reached the limit on their bank line of credit. The size of your asset-based loan is calculated on a percentage of the combined value of your accounts receivable, inventory, equipment, and in special circumstances, real estate. As long as customers continue to make payments as they always have, we use those payments to reduce your loan balance. This, in turn, has allowed us to create a virtuous cycle by driving down funding costs and thereby provide even better terms to these originators. As the borrower manufactures or acquires new inventory, and as they generate receivables from sales, these new assets become available for inclusion in the borrowing base. As global economies eventually emerge from the COVID-19 pandemic, we expect the rebound in demand for credit to be met by renewed constraints on the banking system that will stem from growing non-performing loan balances and renewed scrutiny and calls for restraint from regulators. Structured investments are typically developed in conjunction with a bank or asset manager seeking a specific solution. We can provide your small business with flexible working capital financing solutions, including both accounts receivable and inventory. 4 Steps to Getting a Small Business Loan Without Collateral. Asset Based loans can be structured as revolving credit facilities, allowing a company to borrow from assets on an ongoing basis to cover expenses or investments as needed. The disadvantage of this type of financing, however, is the interest typically charged, which can be as high as prime plus 10%. The illustration below is an example of a regulatory capital relief trade for a bank: Investment managers generally pursue ABF through either a niche-asset class approach or broad, multi-asset class approach. Market Opportunity: European and Asian banks are still estimated to have approximately $65010 billion and $64011 billion, respectively, of NPLs languishing on their balance sheets, even 12 years after the Financial Crisis. Investment Approach: As we performed diligence on the sector, we evaluated partnering with existing originators to build immediate volume but feared we would suffer with a heterogeneous loan portfolio and lack of underwriting control. The advantages of the ABF investment strategy is strengthened by diversity, asset security, negotiated terms, and short duration of many of the underlying loans. 2022 Crestmark , a division of MetaBank, N.A. 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 company currently acts as a servicer of approximately 500 lease contracts that have been syndicated to other investors. The rates on asset-based loans vary greatly from one transaction to the next. This approach, while more involved and operationally complex, enables KKR Credit to tap a primary source of market information and access policies at wholesale prices. Historically, our platform has originated on average $2 billion in loan volumes annually, making it the largest capital provider in this market. Banks seek the exposure transfer with the goal of enhancing Tier I capital buffer (mainly in Europe) or transferring credit risk (mainly in the U.S.). Asia The region encompasses the two largest non-bank economies in the world, India and China, which should rebound following a period of post-growth consolidation. Result: Since closing the investment in mid-2019, KKR has deployed $120 million of capital, representing approximately $475 million in face value of policies across both strategies. The spread of COVID-19 and government-imposed restrictions have created unprecedented near-term uncertainty in the aviation market. Excludes loans securitized or sold to agencies and assets acquired in capital markets or via other secondary/ syndicated channels. Our experienced team will create a unique financing plan to help you and your business thrive. Asset Based Lending facilities help companies manage their rapid growth issues and position them in a favorable position for future growth. Employees of KKR Credit Advisors (US) LLC, and KKR Capital Markets LLC located in the United States are dual employees of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, KKR).General discussions contained within this presentation regarding the market or market conditions represent the view of either the source cited or KKR Credit. She is an expert in personal finance and taxes, and earned her Master of Science in Accounting at University of Central Florida. The views expressed reflect the current views of the Private Credit Team as of the date hereof and neither the Private Credit Team nor KKR undertakes to advise you of any changes in the views expressed herein. Given the businesss capital intensive nature, KKR was able to support the company through additional capital investments in different forms (e.g., term loans, secondary equity raise, private REITs) at each stage of its growth over multiple years. KKR maintains control over the underwriting quality and audits its compliance policies and procedures. All rights reserved. Access to the benefits of (i) privately negotiated transactions where lenders often maintain an upper hand due to a less competitive market, (ii) investments backed by large diversified pools of hard and financial assets, (iii) short duration of many of the underlying loans. Patrick is the general manager for Live Oak Bank's Government Contracting and Asset-based Lending divisions. This allows your company to turn its assets into working capital and access flexible funding quickly. Asset-based financing is a way for companies to use property, inventory, or accounts receivable as collateral to obtain a loan. Find out what our clients are saying about Asset Based loans with SouthStar Capital. 13 Source: Estimates based on PWC Portfolio Advisory Group projections. Asset-based lending may be a line of credit or a cash-funded loan, but either way, the loan money is secured by some sort of collateral from the borrower's business or properties, such as inventory or accounts receivable. When the borrower needs additional working capital, they request an advance, and the capital is sent directly to the borrowers bank account. Therefore, factoring is technically a type of asset-based financing, where the business receivables act as the asset to secure funding from the lender. KKR and its affiliates may have positions or engage in securities transactions that are not consistent with the information and views expressed in this material. This experience equipped him with leadership and team-building skills which have aided him in his professional endeavors. Fix and Flip lending generates between $15 and $25 billion of new volumes annually across the U.S. generating low double-digit annualized yields with average maturities under one year9. In contrast to an unsecured loan, asset-based financing is not constrained by financial ratios or covenants based on credit score or credit history, so you can typically borrow more through ABL lending than traditional personal loans or credit lines, even if you have a strong credit report. Life settlement providers advance a meaningful portion of the policys value to the holders which far exceeds their other options. Control your cost of capital by only using our ABL services when needed, More access to capital than a traditional line of credit. Weaker market participants will likely be forced to contract their lending activity due to inadequate capitalization or inability to secure asset financing from risk-averse banks who will likely refocus their attention on the largest, most established operators.
Result: Although a more recent investment, the vehicle has already financed eight transactions generating an unlevered, high single-digit annual yield, a blended 62% LTV, and modest underlying leverage (below 4.5x Debt/EBITDA) of the corporate borrowers16. Our team is dedicated to streamlining the entire asset-based lending process, from due diligence, loan approval and funding to onboarding, daily service and renewal/graduation.
Member FDIC. Leveraging the team and tech-focused platform, the goal is to start disintermediating existing broker channels and providing a direct-to-consumer offering that substantially reduces cost of customer acquisition and delivers highly attractive product economics. After the lender receives payment, he then deducts the financing cost and fees and remits the balance to the company. We expect to see increased velocity of bank balance sheet assets as they continue to originate new loans for relationship and fee considerations (while transferring risk to third parties), a further shift to non-bank lenders where capital requirements are lower and banking consolidation/restructuring. Accords asset-based lending is ideal for a wide variety of industries across the United States and Canada. The information in this presentation may contain projections or other forward-looking statements (which can be identified by the use of forward-looking terminology such as, but not limited to, "may," "will," "should," "seek," "expect," "target," "intend," "estimate," "believe," or other variations thereon or comparable terminology) regarding future events, targets or expectations regarding the Funds or the strategies described herein, and is only current as of the date indicated. Find out the key differences that set Asset Based Lending apart from Bank Financing. The creation of a platform is typically done in partnership with a deeply experienced management team with subject matter expertise in an industry. By pursuing new and mispriced lending opportunities, the underlying investments can deliver risk and return profiles that are differentiated from other types of private credit. Asset-based loan financing may be used by companies that need short-term working capital to keep day-to-day operations, like payroll, for example, up and running. The borrower then grants SouthStar a security interest in the items being used as collateral, such as Accounts Receivable, Equipment and Inventory. Result: Since KKRs involvement, the company has grown to become a major participant in the SFR market, enlarging rental markets in the U.S. where little or no high quality rental units were previously available. Result: Since closing the investment in late 2018, KKR has purchased, or agreed to purchase, approximately $1.7 billion worth of aircraft assets on lease to a variety of leading airlines across the globe. And our word is our bond, when we say well do something, its as good as done. Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. The total value of the global commercial aircraft fleet in operation in 2019 was $870 billion and each original equipment manufacturers (OEMs) deliver approximately $140 billion of new aircraft.
Our experienced team will work with your business to optimize availability and affordability with the right ABL product. We can also lend against inventory at competitive advance rates. While more complex, investing in a platform can have long term benefits such as above market yields that are protected from erosion by barriers to entry, equity upside potential through warrants in the business, and uncorrelated returns. Asset-based finance lenders tend to favor liquid collateral that can be easily turned into cash if a default on the loan occurs. To identify and assess ABF investment themes and their related opportunity sets, KKR leverages the intelligence and data gathered from around the Firm, including more than one hundred private equity portfolio companies and one thousand traded credit holdings, in areas such as global macro-economics, demographic and industrial trends, and new technology. A value is given to each asset, and a percentage of the value of the asset is made available to the borrower as a line of credit. 11 Source: Deleveraging Asia, Deloitte, September 2019. Whether your business is looking to maximize growth opportunities or manage a successful turnaround, asset-backed financial products provide maximum flexibility, especially in the following circumstances: Asset-based lending works just like a revolving loan, which means its available when you need it, and you can pay it down whenever you choose.
Investment managers typically source portfolio acquisitions through bank or finance company contacts, both proactively and on a reverse inquiry basis. None of KKR Credit Advisors, the Funds, the general partner of the Funds or any of their respective affiliates or employees have updated any such information through the date hereof or undertaken any independent review of such information, nor have they made any representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of any of the information contained herein (including, but not limited to, information obtained from third- party sources) and they expressly disclaim any responsibility or liability therefore. Top Three Benefits of Asset-Based Lending, Line of credit from $3 million to $35 million, Company or industry that is working capital intensive, Quality account debtors superior to the companys profile, Businesses that have an inventory with quality value, Turnarounds: when cash flow debt service coverage, predictability or high leverage (debt/EBITDA) does not support cash flow financing, Businesses seeking to expand borrowing capacity, Competitive AR and inventory advance rates for bulk followed line of credit, Advance rates up to 90% (accounts receivable) and competitive for inventory. However, banks retreat over the past decade has had an equally profound impact on non-corporate activity, a segment that comprises a far larger portion of the global capital markets and real economy. Of course, a multi-asset approach requires that managers have a large, well-resourced global platform with investment and structuring expertise plus operations and financing resources.
However, we believe investing in the highest-quality aircraft assets on lease to top-tier airlines allows for attractive returns even if air travel remains depressed for a prolonged period of time. However, these loans do have lower interest rates than unsecured loans because of the loan's collateral that allows the lender to recoup any losses if the borrower defaults. As an investment strategy, Asset-Based Finance invests in directly originated assets that derive returns from recurring, often contractual, cash flows. Result: Today our platform manages over 700 million in assets across 83,000 loans, generating an average annual interest rate in the high teens from borrowers across the credit spectrum8. 6 KKR may use some or all of the themes described.
In 2019, approximately 10 billion of European tranches were placed with investors. Investment Approach: One example of a regulatory capital trade is a transaction we completed with a bank in northern Europe seeking a credit risk transfer in the form of a credit linked note referencing loans originated by the banks European and U.S. Market Opportunity: Regulatory Capital trades (or Capital Relief trades) are typically defined as synthetic securitizations through which banks transfer the risk of a reference pool of credit exposures to non-bank investors. In the following pages, we present information about each Segment and illustrate specific examples of investments that KKR has made in each one7. ABL gives your company the flexibility it needs to grow, recapitalize, take advantage of supplier discounts, buyout shareholders, or even to fund payroll. Other names for the asset-based finance industry are commercial finance and asset-based lending. In addition, we expected that the subordination structure and excess spread would provide downside protection and mitigate losses. In addition, the views expressed do not necessarily reflect the opinions of any investment professional at KKR, and may not be reflected in the strategies and products that KKR offers. Much like leveraged lending is to corporates, ABF is the life blood of millions of businesses and consumers globally financing day-to-day operations and lives through mortgages, credit cards, receivables financing, consumer installment loans, automobile financing, and equipment leasing, to name a few.