Asset-based loans are typically for companies with less-than-perfect credit. Interest rates and fees on these types of loans have fallen in recent years due to intense competition, but generally they are higher than traditional bank loans.

As with all commercial lending, rates are negotiable. Lenders will look at your credit record, how long you’ve been in business and whether your assets are liquid.

Accounts receivable and inventory are common collateral, but any asset might qualify. When you use accounts receivable to secure a loan, you can expect to get about 75 to 80 percent of the face value of your fresh invoices.

The loan-to-value ratio drops rapidly for older accounts.


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.