When you apply for an asset-based loan, you pledge assets to secure a loan from a bank or a commercial finance company. You still own your assets, but if you don’t make good on your payments, the lending institution can seize them.
In general, Asset-based financing is a way for rapidly growing, cash-strapped companies to meet their short-term cash needs. In general, companies can tap their assets to generate cash flow through asset-based loans or through factoring.
The Asset-based financial services industry has burgeoned in recent years, and small businesses have fueled much of its growth. Although a stigma is still associated with using your assets to get cash, this type of financing is becoming more popular.