What Is Asset Based Lending & How Does It Work?

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Jun 20, 2016 dbr (0)

Bad Credit? No Problem.

What kind of financing can the owner of a growing business hope to get if they have credit problems? One answer to this question is a form of commercial finance known as Asset-Based Lending.

What is Asset-Based Lending?

In general terms, asset-based lending is type of business finance where a loan, line of credit or other form of funding is secured by specific business collateral (“the assets”). An asset-based loan or line of credit can be secured by accounts receivable, inventory, contract rights, intellectual property and/or other types of balance-sheet assets.

How Does Asset-Based Lending Work?

Asset-Based Lending programs can convert current accounts receivable and non-performing assets of a business into cash. Some examples of non-performing business assets that can be used for Asset-Based Lending are (1) Accounts receivable that are being slow-paid, (2) Inventory that is not selling quickly, (3) Intellectual Property rights that are not currently generating income or (4) excess manufacturing raw materials.

Asset-Based Lending Compared to Bank Loans

Asset-Based Lending programs offer many benefits when compared to traditional bank loans.


  • Easier to Get Approved – Because the pledged asset provides the lender with the security they need, an asset-based loan can be approved much easier and much quicker than for the typical bank loan.
  • Provides Immediate Funding – When an asset-based lending program has been established and the pledged asset has been valued, funding can be immediately provided. Same-Day Funding is available for Factoring transactions and draws on an asset-based Line of Credit.
  • Much More Flexible – An asset-based loan can be specifically tailored to the urgent cash needs of a business. For example: the factoring of an invoice can provide immediate cash for payroll or an asset-based line of credit can be designed to meet fluctuating cash flow requirements of a business with fixed expenses and variable income.
  • Your Credit is Not an Issue – When an asset of known value is pledged as repayment security, business credit or personal credit is not an issue for approval of an asset-based funding program.
  • Can Help Improve Credit Ratings – When business cash flow is effectively managed, bills get paid on time and credit ratings are improved.


Because of the wide variety of business assets that can be used to secure an asset-based loan, business owners are encouraged to contact DBR’s COO, Ben Gage, at (760) 738-1400 or ben(at)dbrfactors.com to find out which asset-based funding program would best suit your business.

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