Asset lending (also called asset-based lending or equity lending) is finance approved mainly on the value of the property or asset offered as security, with little or no verification of income. The lender relies on the asset to recover its money if the loan is not repaid.
How It Works
- The lender values the security and lends a conservative percentage of it, so LVRs are much lower than for standard home loans
- Income checks are minimal or replaced by a declaration and a clear exit strategy
- Rates and fees are higher than mainstream lending
- Terms are short, often months rather than decades
Who Uses It
- Business owners who need funds quickly for working capital, a tax debt or an opportunity
- Borrowers waiting on a property sale or settlement (similar to a bridging loan)
- Borrowers who cannot yet document income for a conventional loan
- Developers and investors needing short-term funding
Consumer vs Business Purpose
Loans for personal, domestic or household purposes are regulated under responsible lending laws, which require the lender to check that you can afford the repayments. For that reason, pure asset lending is mostly limited to business or investment purposes. Lenders will ask you to confirm the purpose of the funds.
Risks to Understand
- Higher cost: rates and establishment fees add up quickly
- Exit strategy risk: if the sale or refinance you are relying on falls through, the loan can become expensive or be called in
- Your property is at stake if you cannot repay
Alternatives
Before using asset lending, check whether a low doc loan or a specialist lender could work, since they are often cheaper. A NIK Finance broker can compare both and help plan the exit.