Skip to content 
When it comes to business financing, two of the most common options are SBA loans and asset-based lending (ABL). Both provide access to capital, but they serve very different purposes and come with unique requirements.
If you’re wondering, “Should I apply for an SBA loan or use asset-based lending?” — this guide will help you decide.
What Is an SBA Loan?
An SBA loan is a small business loan partially guaranteed by the U.S. Small Business Administration. Lenders provide the funds, while the SBA reduces their risk by guaranteeing a percentage of the loan.
Popular SBA Loan Programs:
- SBA 7(a) Loan – For general business expenses, working capital, or expansion.
- SBA 504 Loan – For purchasing real estate or major equipment.
- SBA Microloan – Up to $50,000 for startups and small businesses.
Pros:
Lower interest rates
Longer repayment terms (up to 25 years)
Available for a wide range of business purposes
Cons:
Lengthy approval process (weeks to months)
Strict eligibility requirements
Personal guarantees and strong credit often required
What Is Asset-Based Lending (ABL)?
Asset-based lending uses your business assets (such as accounts receivable, inventory, or equipment) as collateral for financing.
Instead of relying heavily on credit scores or financial history, lenders look at the value of your assets to determine how much you can borrow.
Common Types of ABL:
- Accounts receivable financing
- Inventory loans
- Equipment-backed loans
Pros:
Fast approval and funding (sometimes in days)
Easier approval than traditional loans
Flexible use of funds
Cons:
Higher interest rates compared to SBA loans
Requires collateral
Credit lines may fluctuate as asset values change
SBA Loan vs. Asset-Based Lending: Key Differences
| Feature | SBA Loan | Asset-Based Lending |
| Approval Time | Weeks to months | Days to weeks |
| Collateral | Often required, but not always | Always required |
| Interest Rates | Low (6–10% typical) | Higher (8–20%+) |
| Eligibility | Strong credit + financials | Based on asset value |
| Best For | Stable businesses with time to apply | Companies needing fast cash or with limited credit |
Which Is Right for Your Business?
- Choose an SBA Loan if…
- You have strong credit and financials
- You can wait several weeks for approval
- You want long-term, low-cost financing
- Choose Asset-Based Lending if…
- You need fast access to cash
- Your business has valuable collateral (invoices, inventory, equipment)
- You don’t qualify for traditional or SBA loans
Real-World Example
A small manufacturer needs $1.5 million to buy new machinery.
- An SBA 504 loan could provide long-term financing with a low interest rate.
A trucking company needs $250,000 quickly to cover fuel and payroll until clients pay invoices.
- Asset-based lending (invoice factoring) is the better choice, as it provides immediate liquidity.
FAQs
Q1: Can I apply for both SBA and asset-based lending?
Yes, many businesses use both depending on their short- and long-term financing needs.
Q2: Is asset-based lending riskier?
Not necessarily. Since it’s secured by assets, it’s less about your credit history and more about asset value.
Q3: Are SBA loans always cheaper?
Generally yes, but the tradeoff is slower approval and stricter requirements.
Why Choose Chasewood Financial?
At Chasewood Financial, we specialize in helping businesses secure the right financing for their unique needs. Whether it’s navigating the SBA loan process or unlocking capital through asset-based lending, we provide expert guidance and quick funding solutions.
Contact us today to explore SBA loans, asset-based lending, and other financing options.
