Skip to content 
Running a small business means dealing with constant cash flow needs. Payroll, rent, equipment purchases, and unexpected expenses can all add up fast. But what happens if your credit history isn’t perfect, or your bank turns you down for a traditional loan?
That’s where asset-based lending comes in. Unlike unsecured loans, asset-based loans allow businesses to use collateral—such as inventory, equipment, or accounts receivable—to secure funding. This financing option is becoming increasingly popular among small and mid-sized businesses that need fast, flexible access to working capital.
In this guide, we’ll explain what asset-based lending is, how it works, the benefits, and whether it’s the right fit for your business.
What Is Asset-Based Lending?
Asset-based lending (ABL) is a type of business loan that is secured by collateral. Instead of relying solely on your credit score, lenders evaluate the value of your assets—such as invoices, equipment, or inventory—and use them as security against the loan.
For example:
- If your business has $500,000 worth of outstanding invoices, you could secure an accounts receivable loan backed by that collateral.
- If you own heavy equipment or inventory, those assets can also be pledged for financing.
This makes asset-based lending an attractive option for small business owners who need capital but don’t qualify for traditional bank loans.
How Asset-Based Lending Works
The process is straightforward:
- Application & Asset Evaluation – The lender reviews your business assets.
- Collateral-Based Loan Amount – The loan amount is tied to the value of the collateral (often 70–85% of receivables, or 50–60% of equipment/inventory).
- Funding Released – Once approved, you get access to capital quickly.
- Repayment – Payments are made based on loan terms, and collateral is released once the loan is repaid.
Types of Assets Used in Asset-Based Lending
- Accounts Receivable Financing (unpaid customer invoices)
- Equipment Loans (heavy machinery, vehicles, office equipment)
- Inventory Financing (retail stock or raw materials)
- Commercial Real Estate (property-based loans)
Benefits of Asset-Based Lending for Small Businesses
- Access to Quick Capital
Unlike traditional loans that may take weeks, asset-based lending is much faster—funding can be approved within days.
- Easier Approval Process
Credit score still matters, but approval depends more on the value of your collateral than on perfect credit history.
- Flexible Loan Amounts
As your business grows and assets increase, so does your borrowing capacity.
- Improved Cash Flow
Helps stabilize cash flow during slow-paying customer cycles.
- Alternative to Bank Loans
If you’ve been turned down by banks, asset-based loans offer a viable financing solution.
Who Should Consider Asset-Based Lending?
Asset-based lending is ideal for:
- Growing businesses needing capital to expand operations.
- Seasonal companies with cash flow gaps during off-peak months.
- Manufacturers, wholesalers, and distributors with large amounts of inventory or receivables.
- Businesses with poor or limited credit history.
Asset-Based Lending vs. Traditional Bank Loans
| Feature | Asset-Based Lending | Traditional Bank Loan |
| Approval Speed | Fast (days) | Slow (weeks) |
| Collateral Required | Yes (inventory, invoices, equipment) | Sometimes, but often stricter |
| Credit Score Focus | Moderate importance | High importance |
| Flexibility | High – grows with assets | Limited |
FAQs About Asset-Based Lending
Q1: Is asset-based lending only for large companies?
No. Small businesses with accounts receivable, inventory, or equipment can benefit greatly from ABL.
Q2: What are the risks of asset-based lending?
If you default, the lender can seize the collateral. That’s why it’s important to borrow responsibly.
Q3: How much can I borrow with asset-based lending?
It depends on your assets—typically 70–85% of receivables and 50–60% of equipment/inventory value.
How to Apply for Asset-Based Lending with Chasewood Financial
At Chasewood Financial, we make asset-based lending simple and flexible for business owners. Whether you need to cover payroll, purchase new equipment, or expand your operations, our financing solutions are designed to support your growth.
- Fast approvals
- Flexible loan structures
- Nationwide financing solutions
Ready to unlock the value of your business assets? [Contact Chasewood Financial today] to get started with an asset-based loan tailored to your needs.
