Asset Based Lending

Asset-based lending (ABL) is a financing strategy where a business secures a loan or line of credit using its assets as collateral. These assets can include accounts receivable, inventory, machinery, equipment, real estate, and sometimes even intellectual property.

Loan Terms: Based on the assessed value of the assets, the lender offers a loan or line of credit. Typically, the amount of funding a business can receive is a percentage (usually around 70-85%) of the liquidation value of its collateral.

Revolving Structure: Asset-based loans often have a revolving structure, similar to a line of credit. As the business repays the loan, it can borrow against its assets again, providing flexibility in managing cash flow.

Access to Capital: ABL provides businesses with access to financing that they might not otherwise obtain through traditional bank loans or other forms of financing, especially if they have valuable assets but limited cash flow or credit history.

Flexible Financing: Since the loan amount is based on the value of the assets, businesses can often secure larger amounts of financing compared to what they might obtain through other forms of lending. Additionally, the revolving structure of asset-based loans provides flexibility in managing working capital needs.

Lower Interest Rates: Asset-based loans may have lower interest rates compared to other forms of financing, such as unsecured loans or credit cards, because they are secured by collateral.