Asset-based lending is the business of loaning money in an agreement that is secured by collateral. An asset-based loan or line of credit can be secured by inventory, accounts receivable, equipment or other property owned by the borrower. The asset-based lending industry serves businesses only, not consumers, and is also known as asset-based financing.
The terms and conditions of an asset-based loan will depend on the value and type of the assets offered as collateral. Lenders typically prefer highly liquid collateral, like securities that can be easily converted if the borrower defaults on any payments. Loans using physical assets, such as equipment, are considered to be riskier and the maximum loan will be considerably less than the value of the assets.
Benefits of asset-based lending