What is asset-based financing?

Asset-based financing, also known as asset-based lending or asset based financing – refers to a form of financing in which a lender (the financier) obtains security by establishing rights to specific assets of the borrower. These can be assets such as debtors, buildings, machines or inventories. If the loan is not repaid, the financier can seize the collateral.

This form of financing offers flexibility and often releases maximum liquidity based on a company's current turnover figures. This is in contrast to traditional forms of credit that are based on historical data, such as turnover, cash flows and balance sheet ratios (for example, leasing and factoring).