What is Asset-Based Lending?

Asset-based lending is a form of real estate financing where the decision to lend is based primarily on the value of the underlying property, not on the borrower’s income, employment history, or credit score. In this model, the real estate asset serves as the collateral and the core of the risk assessment.

This approach is perfect for investors who work with time-sensitive or complex deals, such as distressed purchases, heavy renovations, or short-term holds, where conventional bank financing may not be a good fit due to documentation requirements or timeline constraints.

How Does Asset-Based Lending Work? 

Asset-based lending focuses on the assets.  No tax returns, pay stubs, or debt-to-income calculations required.

• Deal Submission: The investor shares details about the property, including purchase price, condition, renovation plans (if any), and projected resale or rental value.
  
  

• Asset Evaluation: The lender assesses the property’s current and/or future value using appraisals, comparable sales, and internal risk models.
  
  

• Term Sheet Issued: Based on the asset’s value and project scope, the lender offers terms, including the loan amount, interest rate, fees, and expected closing timeline.
  
  

• Due Diligence & Closing: The process includes title review, insurance verification, and limited background checks. Closings often happen in under two weeks.
  
  

• Funding: The lender wires funds, with renovation draws released in stages after inspection milestones are met.

Why Do Real Estate Investors Choose Asset-Based Lending?

For experienced investors, asset-based lending offers: 

• Speed: Transactions can close in days, not weeks, allowing investors to seize opportunities in competitive markets.
  
  
• Flexibility: Properties that are unfinanceable by banks, due to condition, title issues, or non-traditional use, can still be funded.
  
  
• Simplicity: Limited documentation and fewer approval layers make the process efficient.
  
  
• Scalability: Investors managing multiple deals or entities can fund more projects without tying up personal credit lines.
  
  
• ARV-Based Lending: In many cases, loans are issued based on After Repair Value (ARV), increasing the available capital for renovation-focused deals.

Types of Real Estate Projects That Use Asset-Based Loans 

Asset-based loans are especially suited for high-velocity or value-add strategies. Here’s a breakdown of how this financing supports different real estate business models:  

Fix and Flip Projects

Investors buy underpriced or distressed properties, renovate them to increase value, and then resell within 3 to 12 months. Asset-based loans provide the upfront capital needed for both acquisition and rehab, without requiring income verification or credit checks. 

Because these loans are based on the After Repair Value (ARV), they allow investors to access more funding than conventional options, making it possible to compete with cash buyers and move quickly in competitive markets.

New Construction

Builders or developers secure vacant land or teardown properties to construct new homes or multifamily units. Asset-based lenders evaluate the project based on the projected value of the completed property, rather than the borrower’s financials. 

These loans include draw schedules tied to construction milestones, which allow developers to manage cash flow throughout the build. This funding model is particularly useful for smaller builders who may not qualify for traditional construction loans.

Bridge Financing 

Bridge loans are short-term solutions that help investors secure a property quickly while waiting to sell another property or finalize long-term financing. This type of loan is ideal for time-sensitive acquisitions, off-market opportunities, or situations where a conventional lender cannot meet the required closing timeline. 

Asset-based bridge financing provides flexibility and speed, allowing investors to act decisively without being held up by extended underwriting processes.

Fix and Hold

Investors purchase properties that need updates or repairs, renovate them to improve condition and rental potential, and then hold the asset as a long-term income-producing rental. Asset-based loans provide the upfront funding required for both purchase and renovation. 

Once the property is stabilized and leased, investors refinance into a longer-term rental loan. This approach is especially effective for adding value through improvements, increasing rental income, and then locking in better financing based on the stabilized property’s performance.

What Asset-Based Lenders Evaluate 

Unlike regular lenders, asset-based lenders prioritize:

• Collateral Value: Verified through appraisal or broker opinion, often with a focus on ARV if renovations are planned.
  
  
• Exit Strategy: Whether the investor plans to sell, refinance, or rent, lenders want clarity on how the loan will be repaid.
  
  
• Borrower Experience: While credit scores are less important, a proven track record can result in better terms.
  
  
• Local Market Conditions: The location’s inventory, demand, and pricing trends influence perceived risk.
  
  
• Utilize Ratios: Loan-to-value (LTV) or loan-to-cost (LTC) caps are applied to protect against downside risk.

Considerations When Using Asset-Based Lending 

While asset-based lending can accelerate deals, investors should account for:

• Higher Interest Rates: Typically 8–12%, reflecting speed and risk tolerance.
  
  
• Short-Term Terms: Loans are usually 6 to 18 months. Exit planning is essential.
  
  
• Closing Costs: Origination points, underwriting fees, and third-party charges add to the total project cost.  

Need Reliable Capital for Your Next Investment Property?

Unitas Funding offers asset-based and hard money loans tailored for real estate investors across fix and flip, new construction, bridge, and rental projects. We help you close fast, fund with confidence, and move forward with deals that make sense.

See what Unitas Funding can offer.