Asset-Based Lending
"Asset-based lending" is a fancy way to describe a loan that is backed by some kind of collateral. "Collateral" is a fancy way of describing the stuff you promise to give to a lender if you don't pay back a loan. And if you think "loan" is a fancy word, we have some real estate in Florida we'd like to talk to you about.
Typically, the term "asset-based lending" applies to businesses, though technically something like a home mortgage would represent asset-based lending as well. You have borrowed money to buy a home. If you don't pay the money back, the bank has the right to take the home and resell it in order to recoup their investment. Mortgages very specifically relate to property, but the concept applies to the overall category of asset-based lending.
Companies can use other assets besides property to secure a loan. They might use things like product inventory or customer receivables. The key point is that the lending agreement includes some asset put up as collateral in order to secure the loan.
Related or Semi-related Video
Finance: What is Net Asset Value (NAV)?5 Views
finance a la shmoop what is net asset value or nav nav is how mutual fund
shares are valued or priced at the end of each trading day take a look at this
mutual fund right here it has fourteen hundred seventy shares of Google and [mutual funds document]
three hundred shares of Amazon and five hundred shares of IBM and while you get
the idea at the end of each day the ask prices in
the bid-ask spread ie the ask is the price at which somebody will sell these
shares are added up and yep totaled in this case there are a hundred fourteen
different names in the portfolio and seven million bucks in cash all of which
total eighty-two point three million dollars in value at the end of this day
well there are two million shares outstanding exactly at this moment so
the nav at today's close well it's eighty two point three million divided
by two million shares outstanding to get forty one dollars fifteen cents per
share that 4115 is the nav of the mutual fund and what happens when more
investors join by you know putting in cash well like let's say somebody
invests a million dollars at the end of today well then the fund goes from [money lining up in rows]
having seven million bucks in cash to having eight million bucks in cash and
that investor just bought 1 million / 4115 4 nav share self that mutual fund
company printed out of thin air an incremental twenty four thousand
three hundred one shares bringing its total the two million twenty four
thousand three hundred one the total value of the fund is now eighty three
point three million bucks up from yesterday's eighty two point three
million and the shares outstanding in the fund are now two million twenty four
thousand three hundred one and yeah the nav didn't change just the shares
outstanding and it's nav not not pronounced nav although it'd be kind of
a cool name for a mutual fund anything never like find where you're going nav [tiny red car on map]
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