Asset-Based Lending

What is Asset-Based Lending?

Asset-based lending is the element of loaning money that is within an agreement secured specifically by collateral. An asset-based loan or line of credit may be secured by inventory, accounts receivable, equipment, or other property owned by the borrower.

It's commonly used by larger corporations who use assets that might not normally be utilized in other forms of loans. This form of borrowing is far more prevalent in countries whose legal system allows for borrowers to pledge such assets to lenders as collateral for loans (through the creation of enforceable security interests).

Advantages: Instant cash liquidity, time sensitive business opportunities

Disadvantages: Some lenders allow only low valuations with the asset as the collateral.