Asset-Based Loans of July 2024

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An asset-based loan (ABL) is a type of business financing where the borrower secures a loan using the company's assets as collateral. These assets can include inventory, accounts receivable, equipment, or real estate, among other tangible and intangible properties. Asset-based lending is commonly used by businesses that might not qualify for traditional loans due to unstable cash flow or limited credit history. The loan amount is determined by the value and type of the assets pledged, with liquid assets typically offering higher borrowing capacity.

In practice, asset-based lending works by providing solutions that can take various forms, including lines of credit and term loans. For example, a manufacturing company with significant inventory and accounts receivable may use these as collateral to obtain a revolving line of credit, ensuring it has the necessary cash flow to cover operational expenses such as payroll. By converting assets into working capital, businesses can manage cash flow gaps, invest in growth opportunities, or navigate financial challenges. The specifics of asset-based financing, such as interest rates and loan-to-value ratios, are influenced by the quality and liquidity of the assets, as well as the borrower's financial health.


  1. Collateral-Based Financing. Asset-based loans are secured by the borrower’s assets, such as inventory, accounts receivable, equipment, or real estate. This reduces the lender’s risk compared to unsecured loans.

  2. Flexible Loan Structures. These loans can be structured as revolving lines of credit or term loans, providing businesses with options that best suit their financial needs and cash flow patterns.

  3. Loan-to-Value Ratio (LTV). The amount that can be borrowed is typically a percentage of the value of the collateral. Highly liquid assets often allow for higher LTV ratios.

  4. Eligible Collateral. Different assets qualify as collateral, including highly liquid assets like marketable securities and less liquid assets like machinery or real estate.

  5. Use of Funds. Funds from asset-based loans can be used for various business purposes, including managing cash flow gaps, covering payroll expenses, purchasing inventory, or investing in growth opportunities.

Pros and Cons


Easier Qualification. Since the loan is secured by collateral, businesses with limited credit history or unstable cash flow may still qualify for asset-based financing.

Improved Cash Flow. By converting assets into working capital, businesses can better manage cash flow gaps, ensuring they have the liquidity needed for operational expenses and growth.

Flexible Usage. Funds from asset-based loans can be used for a wide range of purposes without stringent restrictions, making them versatile financing options for various business needs.


Risk of Asset Seizure. If the borrower defaults on the loan, the lender can seize and liquidate the pledged assets to recover the debt, which can disrupt or severely damage the business’s operations.

Additional Fees. There can be various fees associated with asset-based loans, including origination fees, audit fees, and due diligence fees, which can increase the overall cost of the loan.

Collateral Requirements. Not all assets may qualify as collateral. Lenders may reject assets with high depreciation rates or those that are not easily liquidated, limiting the borrower’s options.

How to Get an Asset-Based Loan

Apply for a loan

  1. Evaluate Your Assets. Assess the types and values of assets you have that could be used as collateral. Eligible assets typically include accounts receivable, inventory, equipment, and real estate. The more liquid the asset, the better the borrowing terms you can expect.

  2. Choose the Right Lender. Research and select a lender that specializes in asset-based lending. Both traditional banks and specialized financial institutions offer asset-based lending solutions. Compare their terms, fees, and reputation.

  3. Prepare Financial Documentation. Gather and organize necessary financial documents, including balance sheets, income statements, cash flow statements, and detailed records of your inventory and accounts receivable. Lenders will require these to assess your business’s financial health and the value of your assets.

  4. Submit an Application. Complete the loan application process with your chosen lender. This will include providing detailed information about your business, your assets, and your financial history.

  5. Undergo Asset Appraisal. The lender will conduct an appraisal of your assets to determine their value. This may involve physical inspections and evaluations of your inventory, accounts receivable, and other collateral.

  6. Negotiate Loan Terms. Once the appraisal is complete, the lender will offer you loan terms based on the value of your assets and your financial situation. Negotiate the terms to ensure they meet your business needs, including interest rates, loan-to-value ratios, and repayment schedules.

  7. Close the Loan. After agreeing on terms, you will proceed to close the loan. This involves signing the loan agreement and any other required documentation. The lender will then disburse the loan funds to your business.


  1. Strong Collateral. Businesses must have substantial and eligible collateral, such as accounts receivable, inventory, equipment, or real estate, with a clear valuation.

  2. Financial Statements. Detailed and up-to-date financial statements, including balance sheets, income statements, and cash flow statements, demonstrating the financial health of the business.

  3. Credit History. While credit requirements are generally more lenient, borrowers should still have a reasonable credit history. Specific credit score requirements can vary, but scores above 600 are typically preferred.

  4. Operational History. Established operational history, preferably at least 1-2 years in business, to demonstrate stability and the ability to generate consistent revenue.

  5. Cash Flow. Sufficient cash flow to meet repayment obligations, as lenders will assess cash flow projections and historical performance to ensure the business can handle loan repayments. If the company seeking the loan cannot show enough cash flow or cash assets to cover a loan, the lender may offer to approve the loan with its physical assets as collateral

  6. Asset Appraisals. Professional appraisals of the collateral assets to determine their value and suitability for securing the loan. This may include physical inspections and evaluations of inventory and receivables.

  7. Insurance. Adequate insurance coverage for the collateral to protect against loss or damage, ensuring the lender’s security interest is protected.


  1. Interest Rates. Typically ranges from 5% to 15%, depending on the borrower's creditworthiness, the value of the collateral, and the lender's terms.

  2. Loan Amount. Based on a percentage of the collateral value, often 50% to 85% for accounts receivable and inventory, and up to 50% for equipment and real estate.

  3. Repayment Terms. Can vary from short-term (1-3 years) to long-term (up to 5 years or more), with some structured as revolving lines of credit that allow for continuous borrowing and repayment.

  4. Loan-to-Value (LTV) Ratio. Generally, 50% to 85% for accounts receivable and inventory, around 50% for equipment, and 50% to 75% for real estate.

  5. Fees. Additional fees such as origination fees (1% to 3% of the loan amount), appraisal fees, audit fees, and due diligence fees can apply.

  6. Covenants. Financial covenants may be included, requiring the borrower to maintain certain financial ratios or restrict additional borrowing.

Ways to Get the Money

  1. Direct Deposit to Business Account. The most common method is a direct deposit of funds into the borrower’s business bank account. Once the loan is approved and finalized, the lender transfers the agreed-upon loan amount directly to the designated business account.

  2. Wire Transfer. For larger loan amounts or urgent disbursements, lenders may opt for a wire transfer. This method allows for quick and secure transfer of funds directly to the borrower’s bank account.

  3. Drawdowns from Revolving Line of Credit. If the asset-based loan is structured as a revolving line of credit, the borrower can access funds as needed up to the approved credit limit. Funds can be withdrawn multiple times over the loan term, providing flexibility for ongoing financing needs.

Best Places to Get an Asset-Based Loan

Stratton Equities is a direct lender headquartered in Pine Brook, New Jersey, offering various financing solutions such as hard money loans, fix and flip loans, and cash-out refinance loans. With a broad lending scope across the U.S., excluding a few states, they specialize in quick financing, often delivering funds within 1-2 weeks. Founded in 2017 by CEO Michael Mikhail, Stratton Equities stands out with its foreclosure bailout loans, catering to diverse borrowers' needs.

Asset Based Lending, Inc. (ABL), based in Jersey City, NJ, is a well-established asset-based lender serving clients in 29 states. Offering a plethora of loan programs, including rental property loans and multifamily loans, ABL has funded over 4,600 projects, surpassing $1.6 billion in loans. Led by CEO Kevin Rodman since its inception in 2010, ABL distinguishes itself with competitive rates, minimal documentation requirements, and swift loan closures, typically within 30 days.

Titan Funding, headquartered in Boca Raton, Florida, is a versatile hard money lender specializing in a wide range of asset-based loan options, from fix and flip loans to ground-up construction loans. Led by CEO John Mansour, Titan Funding stands out with its flexibility, offering up to 100% LTV on transactions with cross-collateralization and accommodating borrower credit scores. With loan sizes ranging from $100,000 to $5 million, Titan Funding provides solutions for various property repositioning scenarios.

Griffin Funding, based in San Diego, California, is a mortgage lender focusing on individual borrowers seeking primary residence financing. Unlike typical lenders, Griffin Funding offers asset-based loans targeting customers such as business owners and retirees, allowing them to secure mortgage financing without traditional income documentation. Led by President and CEO Bill Lyons, Griffin Funding provides loans up to $3 million, accepting a diverse range of assets, including cryptocurrency and retirement accounts, for qualification.

Things to Pay Attention To

  1. Collateral Valuation. Ensure your assets are accurately valued. Lenders will assess the quality and liquidity of your collateral, which directly affects your loan amount and terms. Discrepancies in asset valuation can lead to lower loan offers.

  2. Loan-to-Value (LTV) Ratio. Understand the LTV ratio your lender uses. This ratio determines how much you can borrow against the value of your collateral. Higher LTV ratios are typically available for more liquid assets, while physical assets might offer lower ratios.

  3. Interest Rates and Fees. Pay close attention to the interest rates and additional fees associated with the loan. These can include origination fees, appraisal fees, and ongoing monitoring fees, which can significantly impact the overall cost of the loan.

  4. Repayment Terms. Review the repayment schedule and terms carefully. Determine if the payments align with your cash flow and financial planning. Flexible repayment terms can help manage cash flow better during slow periods.

  5. Covenants and Restrictions. Be aware of any covenants or restrictions imposed by the lender. These might include maintaining certain financial ratios or limitations on additional borrowing. Non-compliance with covenants can result in penalties or loan defaults.

How to Repay an Asset-Based Loan?

  1. Understand Your Repayment Schedule. Familiarize yourself with the repayment schedule outlined in your loan agreement. Asset-based loans may require monthly payments or operate as a revolving line of credit with varying repayment terms.

  2. Set Up Automated Payments. To avoid missing any payments, set up automated transfers from your business account to your lender. Timely payments are crucial to maintaining a good relationship with your lender and protecting your collateral.

  3. Monitor Cash Flow. Regularly monitor your cash flow to ensure you have sufficient funds to meet your repayment obligations. Adjust your budgeting and financial planning as needed to accommodate loan repayments.

  4. Communicate with Your Lender. Stay in regular contact with your lender, especially if you encounter any financial difficulties. Early communication can help in renegotiating terms or finding alternative solutions before falling behind on payments.

  5. Utilize Collateral Management Services. Some asset-based lenders offer collateral management services to help you manage and optimize the use of your collateral. These services can ensure that you maximize the value of your assets and maintain compliance with loan terms.

Reasons for Getting Rejected for an Asset-Based Loan

  1. Negative Credit History. A history of poor credit management or defaults on previous loans can be a red flag for lenders. While collateral reduces risk, a negative credit history indicates potential issues with repayment discipline.

  2. Legal and Tax Issues. Ongoing legal disputes or outstanding tax liabilities can deter lenders. These issues can complicate asset liquidation processes and increase the perceived risk of lending to your business.

  3. Industry Risk. Some industries are considered higher risk due to market volatility, regulatory challenges, or economic cycles. If your business operates in a high-risk industry, lenders might be more cautious or offer less favorable terms.

  4. Lack of Operational History. New businesses or those with a limited operational history may struggle to secure asset-based loans. Lenders prefer businesses with established track records that demonstrate consistent performance and asset management.


  1. Merchant Cash Advances (MCAs). MCAs provide a lump sum upfront in exchange for a percentage of future credit card sales or daily bank deposits. While they offer quick access to funds, they often come with high fees and APRs.

  2. Invoice Financing. Also known as accounts receivable financing, this option allows businesses to sell their outstanding invoices to a lender at a discount in exchange for immediate cash. The lender collects payment from the customers when the invoices are due.

  3. Trade Credit. Trade credit allows businesses to purchase goods or services on credit terms from suppliers or vendors. This form of financing does not involve interest payments or collateral but relies on the relationship between the buyer and seller. Trade credit terms can vary, offering businesses flexibility in managing cash flow and expenses without resorting to asset-based loans.

  4. Traditional Business Loans. These loans are typically offered by banks and credit unions and are based on the borrower's creditworthiness and business financials rather than specific collateral. They may include term loans, lines of credit, or Small Business Administration (SBA) loans.

Editorial Opinion

Asset-based loans provide a critical lifeline for businesses that are growing rapidly, undergoing a turnaround, or dealing with seasonal cash flow fluctuations. They offer flexibility that traditional unsecured loans might not, enabling companies to leverage their existing assets to meet financial goals. However, the reliance on physical assets and accounts receivable as collateral also introduces risk; if the borrower defaults, asset-based lenders can seize and liquidate these assets, potentially destabilizing the business.


Keeping your Debt-to-Income (DTI) ratio below 30-40% of your monthly income is crucial. This will help you avoid potential financial problems in the future. Additionally, always assess the necessity and feasibility of taking a loan, ensuring you can comfortably manage its repayment.

How to Choose a Mortage Lender

  1. Check Associations. Look for lenders who are members of reputable organizations, such as the Mortgage Bankers Association (MBA). Membership in these organizations can indicate a higher level of reliability and professionalism.

  2. Review Terms and Conditions. Carefully examine all the terms and conditions of the mortgage contract. Pay special attention to details like the loan term, fixed vs. variable interest rates, and any prepayment penalties.

  3. Interest Rates and Costs. Scrutinize the interest rates and ensure that your contract includes a detailed breakdown of the total cost of the mortgage, including closing costs, origination fees, and any other charges.

  4. Right of Rescission. Remember you can utilize your right of rescission, which typically allows you to cancel the mortgage within three days after signing the agreement. Additionally, use the "cooling-off" period to thoroughly review the contract and make an informed decision before finalizing the mortgage agreement.

  5. Compare Offers. Shop around and compare offers from multiple lenders to find the best rates and terms that suit your financial situation.

Additional resources


What are the four types of asset-backed loans?

  1. Accounts Receivable Financing. This type of loan allows businesses to leverage their accounts receivables as collateral to access immediate cash flow. Lenders advance a percentage of the outstanding invoices, typically around 80%, and collect the full amount from customers. Once payments are received, the remaining balance, minus fees and interest, is released to the borrower.

  2. Inventory Financing. Inventory-based loans enable businesses to use their inventory as collateral to give them access to loaning money. Lenders assess the value of the inventory and provide a loan based on a percentage of its worth. This type of loan is particularly useful for businesses with seasonal inventory fluctuations or those in need of working capital to maintain inventory levels.

  3. Equipment Financing. Equipment-based loans allow businesses to purchase or lease equipment by using the equipment itself as collateral. Lenders provide funds upfront for equipment acquisition, and the equipment serves as security for the loan. This type of financing is common in industries requiring expensive machinery or technology upgrades.

  4. Real Estate Financing. Real estate asset-based loans involve using commercial or residential properties as collateral to secure financing. Borrowers can access funds for property acquisition, development projects, or refinancing existing mortgages. Lenders evaluate the property's value and loan-to-value ratio to determine the loan amount and terms.

What is the interest rate for asset-based lending?

Interest rates for asset-based lending can vary depending on factors such as the borrower's creditworthiness, the value and type of assets used as collateral, and prevailing market conditions. Generally, interest rates for asset-based loans tend to be higher than traditional loans due to the perceived higher risk associated with using assets, rather than credit history, as the primary form of security. Rates can range from single digits to upwards of 20%, depending on the specific circumstances of the loan and the lender's policies.

What is an example of an asset loan?

An example of an asset loan is a business obtaining financing by using its accounts receivable as collateral. Let's say a manufacturing company has outstanding invoices from clients totaling $100,000. Instead of waiting for these invoices to be paid, which could take 30 to 60 days, the company decides to leverage its accounts receivable to secure a loan from a lender. The lender agrees to advance 80% of the total invoice value, providing the company with $80,000 in immediate cash flow. Once the clients pay their invoices, the lender deducts fees and interest before releasing the remaining balance to the company.