When your business needs capital or extra financing for growth, to support operations, or for anything else, it can be hard to know the best method of securing financing. There are lots of types of loans that businesses can use. One type of loan, an asset-based loan, can be a good option for businesses that are trying to avoid traditional credit-based lending.

Asset-based lending uses the value of assets in the business to determine the loan amount. This operates differently from credit-based lending, which uses your financial records and credit history to determine the loan amount and the terms of repayment. When applying for an asset-based loan, the lending agency will determine the value of the business’s assets and then provide a loan as a percentage of that amount. However, these assets are not sold in exchange for the financing. They are instead used as collateral against the loan.

The businesses that typically use asset-based loans are those with high-value assets that are fully-owned by the business. The types of assets vary but can include inventory, real estate, equipment, and accounts receivable, among other assets. The businesses can be in a wide range of industries, including manufacturing, retailers, distributors, and more. Businesses that do not have the credit to support a traditional bank loan can especially benefit from this type of lending.

You do not have to rely on your business credit to get financing. If your business has assets, you may be able to use those as collateral to get financing for your company. By using your assets wisely, you can get the capital you need to make progress in your business and achieve whatever goals you have set. If you want to avoid credit-based lending but need capital, an asset-based loan may be the option for you and for your business.