Asset-Based Lending

AAA

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. Asset

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

    An entity (person or institution) that extends credit by giving ...
  5. Unsecured Loan

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

    A specialized method of providing structured working capital ...
Related Articles
  1. The Essentials Of Corporate Cash Flow ...
    Retirement

    The Essentials Of Corporate Cash Flow ...

  2. What Is A Cash Flow Statement?
    Markets

    What Is A Cash Flow Statement?

  3. Cash Flow On Steroids: Why Companies ...
    Markets

    Cash Flow On Steroids: Why Companies ...

  4. Mezzanine Financing
    Entrepreneurship

    Mezzanine Financing

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center