Asset-based lending is a process in which a company or a business acquires a loan from an agency against some collateral or asset which is generally inventory, account receivable, property, etc. It is important to keep in mind that it can only be obtained by a business or company and not individuals. There are certain points to keep in mind while taking an asset-based loan.

How Does it Work?

An asset-based loan is acquired when a business opts to take a loan by mortgaging some asset or collateral to the lender. The borrower gets the loan based on the valuation of the collateral secured and has to repay it within the stipulated time at a certain rate of interest which is solely decided by the lender.

Different Advantages of Asset Based Lending

There are various advantages of obtaining an asset-based loan. Some of them are:

  • It helps to leverage the financial growth of a particular company or business
  • It is a huge driving factor for turnarounds. With asset-based loans, there is a constant flow of funds that helps to refurbish the business processes
  • It is a key factor that helps to restructure the business plannings and steps as well as decisions taken for the growth of the business
  • It helps to increase the amount of acquisition owned by a particular company as there is a steady flow of capital to acquire them.

Rate of Interest for Asset Based Loans

Usually, the rate of interest related to these asset-based loans varies from lender to lender. Different lenders ask for different rates of interest depending on the amount lent and the collateral secured against the loan.

Asset Based Lending vs Invoice Factoring

In asset-based lending, some kind of materialistic collateral is secured against the loan and is repaid according to the amount wracked up against the loan. On the other hand, invoice factoring is a method when the invoice which is received, acts as the collateral against the loan acquired.

The Downside of Asset Based Lending

Usually, these loans are given away to big businesses or companies. Small businesses and individuals are not eligible to acquire this loan. But with the right kind of assistance, these loans can be obtained which would prove to be profitable at the end of the day.

Accord Financial asset lending lends asset-based loans, charging low rates of interest, and providing secure services and easy retrieval of funds.