Asset-Based Lending

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DEFINITION of 'Asset-Based Lending'

A business loan secured by collateral (assets). The loan, or line of credit, is secured by inventory, accounts receivable and/or other balance-sheet assets.

Also known as "commercial finance" or "asset-based financing".

INVESTOPEDIA EXPLAINS 'Asset-Based Lending'

This type of loan is often used to meet various cash flow needs of companies, for example, meeting payroll or building inventory.

Interest rates on these loans, as you can imagine, are less than interest rates on an unsecured loan or line of credit because if the borrower defaults the lender has the ability to seize assets and attempt to recoup their lending costs.

RELATED TERMS
  1. Asset Base

    The underlying assets giving value to a company, investment or ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Creditor

    An entity (person or institution) that extends credit by giving ...
  4. Asset-Based Finance

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  5. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
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