The Value of Debt: How to Manage Both Sides of a Balance Sheet to Maximize Wealth

Chapter 4

The Value of an Assets-Based Loan Facility (ABLF)

You may remember that at the end of Chapter 1 there was a section called, “The One Thing You Must Consider.” That “one thing,” of course, was to set up an ABLF in a timely fashion because there are great advantages to doing so. I will therefore go through the intricacies of an ABLF, including

• What an ABLF is and how it works
• Why virtually every company has an ABLF or the equivalent of an ABLF
• The many advantages of having an ABLF in place
• The criticality of being proactive before disaster strikes
• Surviving storms and natural disasters—when you need money now!
• Family finances: First Bank of Mom and Dad; elder care bridge loans
• Taking advantage of opportunities and distressed sales
• Average ABLF usage
• A win-win-win: benefiting yourself, your advisor, and his or her firm

What an ABLF Is and How It Works

Virtually every major financial firm offers what I have labeled an ABLF, or assets-based loan facility. Each firm will typically brand this type of loan facility under some marketing name. There are also secured personal lines of credit, margin accounts, and what are called custom or tailored loans. In this book I will refer to all of these types of loans and lines of credit as ABLFs. Consistent with loans of nearly every type, each institution has a full list of rules, regulations, limitations, and disclaimers that you will need to fully understand by working closely with your financial advisor or private banker.

While the ...