Asset-Conversion Loan

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Asset-Conversion Loan

A loan secured by an asset. That is, an asset-conversion loan converts an asset into cash in order to finance a company's activities. This term is most commonly used when a company is seeking short-term financing, such as working capital. Generally speaking, an asset-conversion loan involves a company's pledge of its accounts receivable or inventories in order to obtain a loan, but other assets may be used as well. See also: Factoring, Collateral.