How Asset Based Loans Work

An asset based loan also known as an ABL for short is a great way to pledge your assets as collateral for a loan. The process is pretty simple an asset based lender will  establish how much of a loan your business  qualifies for by determining the total worth of all the businesses assets. The lender will then advance a percentage of the net value of the approved assets to the borrower.

This differs from medical receivables factoring and financing because the business does not sell its assets to the asset based lending company, Instead, it borrows against the approved net value of its receivables. The assets are used as collateral to secure the loan. If the business cannot make its payments, then the ABL lender can seize the assets.

So before you sign on the dotted line for an asset based loan, it is important it to compare the terms and conditions of the contract with each lenders. Lender rates value of assets, closing fees, origination fees, etc. Rates on asset based lending is higher than traditional loans, but lower than merchant cash advances.