An asset-based loan is a type of business loan where a company secures the loan using its assets as collateral. The loan amount is usually a percentage of the value of the assets being pledged, typically ranging from 50% to 85% of the asset value, depending on the quality and liquidity of the asset.

The type of assets used are:Accounts Receivable: Unpaid invoices or amounts owed to the business by customers Inventory: Products or raw materials held by the business Equipment and Machinery: Physical assets used in production or operations Real Estate: Commercial property owned by the business Intangible Assets: In some cases, intellectual property, patents or trademarks can also be used

Asset-based loans can be structured as short-term loans (to cover temporary cash flow gaps) or as revolving line of credit, where the business can borrow and repay multiple times as needed, up to the set limit, much like a credit card. Repayment terms are typically structured as monthly or quarterly payments, but the asset used as collateral remains in place throughout the term of the loan.