Asset Financing

AAA

DEFINITION of 'Asset Financing'

Using balance sheet assets (such as accounts receivable, short-term investments or inventory) to obtain a loan or borrow money - the borrower provides a security interest in the assets to the lender. This differs from traditional financing methods, such as issuing debt or equity securities, as the company simply pledges some of its assets in exchange for a quick cash loan.

INVESTOPEDIA EXPLAINS 'Asset Financing'

This type of financing is typically used for short-term borrowing or working capital. Companies using asset financing commonly pledge their accounts receivable, but the use of inventory assets is becoming more frequent.

RELATED TERMS
  1. Working Capital

    This ratio indicates whether a company has enough short term ...
  2. Asset

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

    1) The financial activities related to running a corporation. ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Bridge Loan

    A short-term loan that is used until a person or company secures ...
  6. Asset-Conversion Loan

    A short-term loan that is typically repaid by liquidating an ...
Related Articles
  1. Will Corporate Debt Drag Your Stock ...
    Investing Basics

    Will Corporate Debt Drag Your Stock ...

  2. Uncovering Hidden Debt
    Bonds & Fixed Income

    Uncovering Hidden Debt

  3. What is the difference between asset-based ...
    Investing

    What is the difference between asset-based ...

  4. Material Adverse Effect A Warning Sign ...
    Markets

    Material Adverse Effect A Warning Sign ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center