What is Asset-based Finance (ABF)?

Asset-based financing (ABF) is a category of financing solutions where a loan, line of credit, or credit is provided to a company based on the value of its assets. Instead of relying primarily on credit scores or cash flow projections, ABF allows businesses to secure funding by using their tangible and sometimes intangible assets as collateral. Common assets used in this type of financing include accounts receivable, inventory, equipment, and real estate.

The amount of credit available in an ABF arrangement typically depends on a percentage of the appraised value of the secured assets. This financing method is particularly beneficial for companies looking to improve liquidity, manage cash flow, or finance expansion without diluting equity. It is a flexible solution that adapts to the borrowing needs of the company, offering a way to turn the value locked in assets into working capital.

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