Asset Based Financing

Debt Term

When a business uses some of their assets as collateral for debt it is called asset based financing. This broad category includes specialized financings that cover just a particular type of asset:

  • accounts receivable for factoring,
  • real estate loans,
  • equipment financing,
  • inventory financing.

These types of financings tend to be specialized because particular knowledge is needed both to assess the value of assets (and appropriate loan-to-asset ratios), and to generate cash from those assets if the business defaults on the debt.

Don Gooding

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