Asset-Based Lending: How To Turn Business Assets Into Working Capital

Learn how asset-based lending works, what collateral you can use, and when an asset-based loan is the right financing option for your business.

Borrow up to $5 million against your assets

APRs as low as 5% for well-qualified borrowers

Get funded in one to 10 business days

Use your invoices, inventory, equipment, or home equity

Credit scores as low as 550

75+ vetted, reputable lenders

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Won't impact your credit

What Types of Assets Do Lenders Use for Asset-Based Financing?

Asset-based lenders lend money against your company's assets. Here are the ones businesses pledge most often.

The asset	What happens	Typical advance rate
Accounts receivable	A large distributor waits 60 days to get paid on a major invoice. Instead of waiting, it borrows against that invoice and pays its employees right away	Up to 80% of the invoice amount
Inventory	A retailer borrows against warehouse inventory ahead of the peak selling season	Up to 65% of inventory value
Equipment	A construction company buys an excavator with the proceeds of an equipment loan. The excavator becomes the collateral	Often up to 100% of the equipment cost
Commercial real estate	A manufacturer finances the building it operates out of	Varies by lender
Blended borrowing base	Receivables and inventory together set the size of a revolving line. As those balances grow, so does the line	Varies with the asset mix
Home equity	A restaurant owner uses a HELOC to finance a new location and keeps business assets free and clear	Up to $750,000

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Minimum Requirements

Here's the basics you need to qualify for an asset-based business loan. Even if you have bad credit, your Clarify advisor will help you explore funding options based on your FICO score.

Over $10,000/month in gross revenue

Your company must be earning at least $10K per month in gross sales.

At least 550 credit score

You can get approved with any FICO credit rating. But lenders often give terms and rates depending on your creditworthiness.

Minimum 6 months in business

Your company should be operational for over six months. Ideally, over one year. This shows lenders that your business is sustainable and won't default on the loan.

Have a business bank account

Your Clarify advisor will ask for 3 months of your most recent bank statements to verify income.

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Asset-Based Loans vs. Other Types of Loans

Before you decide which financing fits your business, it helps to review how ABL differs from other financing options. Both give you access to working capital. They just get there in very different ways.

Asset-based loans price and approve you based on the value of your collateral. Unsecured loans rely on your credit score, cash flow, and general financial health.

Characteristic	Asset-based loans	Unsecured loans
Collateral required	Yes. Accounts receivable, inventory, equipment, real estate, intellectual property, or equity in your home through a HELOC	No
What drives approval	The quality and value of your business assets. Lower emphasis on creditworthiness	Credit score, cash flow, general financial history
Interest rates	Generally lower, because the loan is secured	Generally higher, because the lender takes on greater risk
Borrowing limits	Greater, based on the value of your collateral	Lower, based on creditworthiness and revenue
Time to fund	Quicker, provided your collateral is strong	Longer, with stricter underwriting
Good for	Businesses with significant assets, uneven cash flow, or lower credit	Businesses with excellent credit and steady revenue but little collateral

Benefits of Asset-Based Loans

An asset-based loan can serve two purposes: covering ongoing operating expenses and providing the capital you need to expand. Unlike many unsecured loans, asset-based loans open up financing options for small and midsize companies that have enough collateral to serve as a borrowing base for a line of credit.

Here's what you get when you apply for an asset-based loan through Clarify Capital.

Little to no paperwork

Banks hand you a mountain of paperwork. We don't. Your lending advisor handles the documentation tied to your loan.

Competitive bidding among lenders

When multiple lenders are vying for your loan package, you benefit. Your lending advisor shops your file across our network and brings you competing bids. Since the lender takes on less risk when the loan is secured, interest rates on secured financing generally fall below what you'd pay unsecured.

One lending advisor, from application to closing

You won't get a call center or a chatbot. You'll get one real person, based in the U.S., who knows your file inside and out and answers your questions before you close. That same lending advisor stays with you through final approval.

Short-term working capital needs

Every business hits stretches where it needs working capital to support operations, build liquidity, and invest in growth. An asset-based loan can meet those short-term needs without forcing you into costly credit card debt.

Full disclosure on every cost and condition

Before you sign anything, you'll have full disclosure on every cost and condition tied to your loan. Your lending advisor goes over the fees, the advance rates, and any financial covenants in detail, so you can make an informed call about whether the financing fits your needs.

Flexible payment options

Most asset-based financing works like a revolving line of credit. You borrow only what you need from the borrowing base that your collateral supports. Once you repay it, you can borrow again from that same borrowing base.

Ways Businesses Use Asset-Based Loans

Business owners put asset-based working capital to work in a lot of ways. Here are some of the most common.

Inventory and supply chain

You need enough inventory to supply your customers and keep orders going out on time. An asset-based loan lets you buy the goods to fill those orders when they come in.

Ongoing operating expenses

Cash flow swings can leave you short on rent, utilities, and other recurring costs. An asset-based loan covers those expenses when revenue dips below expectations and your fixed expenses don't budge.

Expansion and growth

Scaling usually costs money before it makes money. Rapid growth eats liquidity fast, and a credit facility tied to your receivables and inventory grows right along with them. Cash on hand lets you hire, expand operations, and take on bigger contracts.

Purchasing new and used equipment

Some industries run on specialized machinery. Plenty of other businesses just need reliable basics. An asset-based loan lets you buy new or used equipment against the fixed assets you already own. Equipment financing is one of the most common scenarios we see in construction, manufacturing, and automotive.

A HELOC Is Asset-Based Lending, Too

With a HELOC, you put the equity in your home to work as collateral. The mechanics are the same. You borrow against an asset you already own, and that same asset secures the loan. The Consumer Financial Protection Bureau (CFPB) describes a HELOC as a way to borrow money using the available equity in your home. The main difference is whose asset is on the hook. Here's what a HELOC looks like with Clarify Capital.

Credit line	Revolving, up to $750,000
Collateral	The equity in your home
Rates	Start at prime, or 6.75% as of July 2026
Draw period	Up to five years
Repayment term	Up to 30 years
What drives approval	Your personal income, credit history, and equity
Revenue or time-in-business minimum	None, unlike business-asset lending

Your home is the collateral behind this loan. If you fail to repay it and default, the lender can foreclose on your home and sell it to recover what you owe. That's a far greater risk than pledging a piece of equipment, and it deserves a serious conversation with your lending advisor before you sign.

Alternatives to Secured Loans

Here are common alternative funding solutions to asset-based loans. Your dedicated Clarify advisor will help you explore all options.

FAQs About Asset-Based Loans

Here are the most common questions I hear about asset-based loans.

What Is an Asset-Based Loan?

Asset-based loans let businesses secure money from a lender based on the value of their receivables, inventory, equipment, or real estate. Because the loan is secured by the business's assets, lenders can set up revolving credit facilities that let you draw funds again and again, and they establish financial covenants that keep the quality of your assets where it needs to be to support the loan.

How Do Asset-Based Loans Compare With Traditional Bank Loans?

Traditional lenders rely heavily on your credit score and financial history. Asset-based lenders rely more heavily on the value and quality of the assets you're using as collateral.

Is My Business a Candidate for an Asset-Based Loan?

Asset-based lending works best for businesses with tangible, physical assets. Manufacturing, wholesaling, and distribution are good candidates.

What Assets Can Be Used for Asset-Based Lending?

Lenders commonly take accounts receivable, inventory, and equipment. Commercial real estate and intellectual property may be considered under certain circumstances. Home equity works too, through a HELOC, though that pledges a personal asset rather than a business one. These asset types back financing like accounts receivable loans, inventory financing, equipment financing, and other secured business loans.

How Are Loan Amounts Determined in Asset-Based Lending?

Loan amounts typically equal a percentage of the value of your pledged assets. Lenders call that percentage the advance rate. For example, you could receive 80% of your accounts receivable value or 50% of your inventory value.

Are Interest Rates for Asset-Based Loans Higher Than for Unsecured Loans?

Interest rates vary. But because the loan is secured by an asset, an asset-based loan can often price better than an unsecured loan.

What Are the Disadvantages of Asset-Based Loans?

You place your assets at risk. If you default, the lender can seize the collateral. Lenders also cap how much you can borrow relative to the value of the assets you pledge, so a company with minimal assets can't borrow very much. Expect lenders to request regular reports on your accounts receivable or inventory, and expect covenants tied to those same areas. A HELOC raises the risk further, since the collateral is your home.

What Happens if I Can't Pay Back an Asset-Based Loan?

If you fail to repay an asset-based loan, the lender can seize the assets you pledged as collateral to recoup what you owe. If you default on a HELOC, the lender can foreclose on your home.

Which Banks Provide Asset-Based Lending Services?

Many large commercial banks operate asset-based lending departments, and so do specialty finance companies. Bank programs typically want larger deals, stronger financial statements, and longer operating histories than a small or midsize company can show. Clarify Capital works differently. Instead of having you shop each bank individually, looking for terms that fit your business, we match you against our network of 75+ vetted, reputable lenders. You submit your application once.

When To Use an Asset-Based Loan?

Use an asset-based loan when your business has significant collateral but your credit, uneven income, or short operating history would limit you at a bank. It also fits when you want to borrow more than your current cash flow can support, or when your revenue swings seasonally and you want financing that tracks your asset values.

How Does Clarify Capital Protect My Information When I Apply?

Clarify follows SOC 2 security principles, so the financial documents you send stay protected through the review. Checking your options will not affect your credit score, because the lender's first look at your credit is a soft pull, not a hard inquiry.