The practice of making a
loan secured by an
asset. While, in theory, many loans are asset-based
mortgages, the term most commonly applies to loans secured by something unusual, such as
accounts receivable or intellectual property. Businesses take out most asset-based loans and pledge something used in the conduct of their businesses as collateral, such as
inventory. As with all
secured loans, asset-based loans have lower
interest rates than
unsecured loans. The practice is also called asset-based lending.