What is Asset Financing?

Asset Financing involves securing loans or lines of credit using a company’s assets — such as inventory, accounts receivable, equipment, or property — as collateral. It’s a popular funding strategy for businesses that need working capital or liquidity without selling equity.

How Asset Financing Works

  1. The business pledges assets to a lender.

  2. The lender evaluates asset value and risk.

  3. Financing is provided based on the collateral’s worth.

  4. If the borrower defaults, the lender can seize the pledged asset.

Example

A logistics firm uses its fleet of vehicles to secure a loan for expanding operations.

Types

  • Hire Purchase

  • Equipment Leasing

  • Invoice Financing

  • Inventory Financing

Advantages

  • Faster access to capital

  • No dilution of ownership

  • Flexible repayment structures