cRYPTO Glossary

Asset-based lending is a type of financing where lenders provide funds to a company based on the value of its assets, rather than primarily on the company's creditworthiness.

Explanation of Specific Terms:

• Lending: The process of providing financial resources to a borrower, typically with the expectation of repayment with interest.
• Assets: Tangible and intangible resources owned by the company, such as accounts receivable, inventory, equipment, real estate, or intellectual property.
• Value of assets: Lenders assess the value of these assets and use them as collateral to secure the loan. The loan amount is usually a percentage of the appraised value of the assets.

Key Points for Beginners:

• Risk assessment: Asset-based lending focuses more on the quality and value of the collateral (assets) offered by the borrower rather than solely on the borrower's credit history or financial statements.
• Types of assets: Eligible assets vary but commonly include accounts receivable (invoices owed by customers), inventory (goods ready for sale), and equipment (machinery or vehicles).
• Benefits: This type of financing can provide businesses with access to capital that might not be available through traditional loans, especially for companies with strong asset bases but irregular cash flows or credit challenges.