Asset Based Financing

A loan secured by your company’s assets. In other words, if you default, the bank can take your assets...i.e., never delve into asset-based finance unless you have a plan to pay back that loan. (Side Note: accounts receivables can also be used in asset-based finance, but accounts must be current.)

Asset-based finance is similar to asset financing. The financing is given based on the assets the company has, rather than the credit or the profit they produce. Inventory, machinery, real estate, equipment and working capital can all be used. This can be done for companies with no established credit, companies seeking to refinance a current loan, or those with no credit left to borrow against. The bummer here is that the interest rates are higher, often set at prime, plus 10%. In other words, the business risks their stuff, and a great deal of interest.