In the simplest meaning, asset-based lending is any kind of lending secured by an asset. This means, if the
loan is not repayed, the asset is taken. In this sense, a
mortgage is an example of an asset-backed loan. More commonly however, the phrase is used to describe lending to business and large
corporations using assets not normally used in other loans. These can include exotic things like lending against the value of a
trademark or whole assets of
intellectual property. For example,
Midway Games took out a line of
credit secured by its
Mortal Kombat franchise; if it fails to repay, the
bank then owns the Mortal Kombat franchise and can sell the rights to it.
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The practice of making loans that use assets such as receivables and inventory as collateral for the loan. In asset-based lending, the quality of the collateral becomes preeminent in determining the creditworthiness of the customer.
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