Asset based loans are any kind of loan secured by an asset. If the loan is not repaid, the asset is seized by the lender. A mortgage is an example of an asset based loan. However, the term is used more commonly to describe business lending.
Terms for asset based loans are usually for a short period of time and interest rates may be higher than conventional financing. However, these loans are often needed by companies that would not have their required funding needs met by a conventional loan process.
Real estate, accounts receivable, inventory, machinery and equipment are the typical assets that secure the loan. However, assets such as things like the value of pharmacy script files, a trademark, or whole assets of intellectual property may also be considered in an asset based transaction. The loan may be secured by a single asset or a combination of assets.
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