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?
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 cashflow 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