Asset-based financing

Asset-based financing is a loan made by a bank or other financial organization, to a business where the underlying collateral is comprised of two assets: inventory and accounts receivable.

This kind of financing is typically a sophisticated transaction requiring accounting levels that can closely track the actual monthly values and quality of the assets used as collateral. Therefore, with a some exceptions, the classic asset-based loan is typically only available to businesses that produce monthly financial statements that are also audited annually.

Asset-based loans will usually be offered by financial institutions that have professionals that are qualified to manage such a sophisticated relationship, with loan amounts typically in the millions.