Asset-based loan

Okay kiddo, imagine you're playing with your toy box. Your toy box is like a business that has things called "assets", which are like toys you can use to make money.

Now, let's say your friend wants to borrow one of your toys but they can't afford to pay you right away. So instead, they ask if they can borrow some money from you and use the toy as "collateral", which means they promise to give you the toy back if they can't pay you back.

An asset-based loan is kinda like that. A company has things like buildings, equipment, and inventory that they can use as collateral to borrow money. So if they can't pay the money back, the lender can take their things as payment instead.

It's like when you're playing with your toys and you trade one toy for another one, except instead of toys, grown-ups use things they own as collateral to borrow money.