Asset-Based Lending
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 Definitions
Articles Of Interest
-
The Essentials Of Corporate Cash Flow
Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself. -
What Is A Cash Flow Statement?
Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports. -
Cash Flow On Steroids: Why Companies Cheat
Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it. -
Making It Big On Wall Street
Read about some of the most glamorous Wall Street jobs and what it takes to land one. -
Mezzanine Financing
Learn about this alternative method of financing companies use to finance expansion. -
Promissory Notes: Not Your Average IOU
These may be a handy way to borrow money, but this convenience does not come without risk. -
What would happen to a company's external fund requirements if it reduces the payout ratio, or if it suffers a decline in its profit margin?
In short, the stronger the company's internal cash flow, and in turn cash position, the less the need to draw on an external fund. If internal cash flow or the retention ratio increases, external ... -
Why do companies issue debt and bonds? Can't they just borrow from the bank?
Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank as more restrictive and expensive than selling debt on the open market ... -
What is the difference between investment banks and merchant banks?
Merchant banks and investment banks, in their purest forms, are different kinds of financial institutions that perform different services. In practice, the fine lines that separate the functions ... -
What is the difference between asset-based lending and asset financing?
In the most common usage, the terms "asset-based lending" and "asset financing" refer to the same thing. Asset-based lending generally refers to a business using its assets as collateral for ...
Free Annual Reports