Asset-based lending

Asset-based lending (ABL) is a way for established businesses to finance rapid growth or big contracts, using assets such as invoices, inventory, equipment, machinery, or commercial property as security for a business loan.

What is asset-based lending?

Typically, an asset-based loan is a structured combination of invoice finance and a business loan — for example, invoice discounting alongside an unsecured business loan.

This allows the business to maximise cash availability and serve bigger contracts, recruit or invest.

Why use asset-based lending?

If you’re looking for a way to fund your business, you might be able to find it in your balance sheet — where cash is tied up in various assets. Asset-based lending (ABL) allows you to release this cash to fund an expansion project or simply accelerate day-to-day cash flow.

Asset-based lending uses your sales ledger and physical assets such as machinery, stock, and property. It’s suitable for larger businesses and corporates, and gives you the funds necessary for both cash-flow stability and longer-term growth.

Many larger companies find that debtor balances are the biggest asset on the balance sheet. The trouble is, those owed funds often take weeks to turn into cash, particularly if you invoice on terms of 60 days or more, which seriously restricts growth potential.

ABL aims to solve this issue by lending based on the complete balance sheet of the business, whether that includes debtors, physical assets, inventory, or even intellectual property.

Benefits of asset based lending

    • Can be more flexible than loans or overdrafts
    • Funding secured against the value of your assets
    • Use the finance for a wide range of business purposes
    • Debtor protection available, to safeguard against bad debts
    • Facilities grow with the business
    • Reduces administrative burden of separate finance facilities

How much can I borrow using asset-based lending?

Loan sizes for asset-based lending are normally quite large, which means there are fewer lenders at this higher end of the market. The good news is, this means lenders are far more likely to take a bespoke view of your business — without taking a ‘computer says no’ approach.

When is asset-based lending useful?

ABL can be a good solution for a wide range of business scenarios. It’s particularly useful when you require working capital finance for specific uses alongside more general cashflow finance. Here are some of the situations where ABL is popular:

  • Funding a large contract
  • Management buy-outs and buy-ins (MBOs and MBIs)
  • Mergers and acquisitions
  • International expansion
  • Turnarounds and pre-packs
  • Refinancing

We can help

If you’re looking for asset-based lending or thinking about your next move, we can help you find the right funding for your business. Apply today.