In an article yesterday (Asset-Based Lending Grows in Popularity), the Wall Street Journal reported that asset-based lending – loans secured by the borrower’s assets as collateral – surged during 2008 and 2009.
The reason: Businesses that lack the credit rating, track record, or patience to seek traditional sources of capital can get loans by pledging their equipment, inventory, accounts receivable, or other liquid assets as collateral.
Downsides: Asset-based lending comes with a relatively high interest rate. If a payment is missed, the collateral may be seized by the lender.
Related post: Realistic Financing Options for Startup Companies
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.