In asset-based lending, borrowers receive funds by pledging specific assets as collateral against the loan. This approach enables companies to leverage their assets to access capital more easily than through traditional forms of borrowing. The loan amount is directly related to the value of the assets provided as collateral. Lenders conduct a thorough evaluation of these assets to determine their worth and subsequently set the loan terms, including interest rates and repayment schedules. This form of lending is particularly popular among businesses with strong asset bases that may not yet have impressive credit histories.