Definition of Asset-based lending:
Type of financing in which the asset being bought (such as inventory, land, or machine) is used as a collateral. In asset based lending, the quality of the collateral and not the financial strength of the borrower is of prime importance. The lender bases the amount of loan on the value of the asset being financed, and the ease with which it could be sold off if the borrower defaults. It is a type of off balance sheet financing, and is also called asset based financing, asset financing, or commercial finance. See also discounting of accounts receivable and factoring.
Asset-based lending is the business of loaning money in an agreement that is secured by collateral. An asset-based loan or line of credit may be secured by inventory, accounts receivable, equipment, or other property owned by the borrower.
The asset-based lending industry serves business, not consumers. It is also known as asset-based financing.
How to use Asset-based lending in a sentence?
- Asset-based lending is often used by small to mid-sized businesses in order to cover short-term cash flow demands.
- Liquid collateral is preferred as opposed to illiquid or physical assets such as equipment.
- Asset-based lending involves loaning money using the borrower's assets as collateral.
Meaning of Asset-based lending & Asset-based lending Definition