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Asset-based lending refers to any kind of lending that is secured by an asset. If the loan is not repaid, the asset is taken. The loan, or line of credit, can be secured by inventory, accounts receivable and/or other balance-sheet assets. This is also termed as "commercial finance" or "asset-based financing".
This type of lending is usually done when the normal routes of raising funds, such as the capital markets (selling bonds to investors) or normal unsecured or mortgage secured bank lending is not possible. This happens when a company is in dire financial status.