2016-12-15 00:00:00 Finance and Accounting English Find out what asset-based financing is and why it is becoming a preferred method of financing for small- to mid-sized businesses. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/03/Accountant-Explaining-Asset-Financing-Associate.jpg Small Business Term: What Is Asset Based Financing?

Small Business Term: What Is Asset Based Financing?

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Asset-based financing is a form of short-term financing in which a business uses an asset as collateral to obtain a cash advance. The types of assets used in asset-based financing includes a business’ receivables, purchase orders, and inventory. Asset-based lenders will advance up to 90% of the value of the asset and are repaid when the business’ customer remits payment.

Asset-based financing is becoming a preferred source of capital for small- to mid-sized businesses for a number of reasons:

  • Qualification does not depend on a business’ credit standing. It relies on the creditworthiness of the business’ customers.
  • Asset-based loans can be approved within days instead of weeks or months typical of traditional bank loans.
  • Asset-based loans do not require business or personal assets for collateral.
  • Companies can keep capital working in the business while using the lender’s money to cover immediate costs.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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