Everything You Need to Know About Asset-Based Lending

By 03.01.22September 7th, 2022No Comments
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If you are a business owner who is looking to fund a new growth initiative, you’ve likely gone through the many options to raise working capital. There are the more typical methods such as traditional small business loans from banks, money from angel investors, and equity financing. And then there are the not-so-typical methods such as asset-based lending (ABL)– which we are here to explain.

What is asset-based lending?

In a nutshell, asset-based lending is a form of debt financing. (We know “debt” can sound like a scary word but keep reading.) It allows you to secure a loan based on the market value of your business assets. We’ll go into this in further detail below, but you should know upfront why this is an ideal type of loan: With asset-based lending, you can borrow up to 90% of accounts receivable, 60% of inventory, and 40% of intellectual property. You are also borrowing in the form of a credit line, which is even more ideal, because you can use those funds whenever you need money. Nothing more. Since your assets are your collateral, there is maximum liquidity and few covenants for you to fear of possibly breaking. All in all, this is an extremely flexible solution that bridges the buy-and-sell in your business so you can accelerate your sales cycle. As your assets grow, your line can also grow.

Now, let’s dive a little deeper:

Your tangible assets are your MVP

Unlike traditional loans, which examine your financial history and credit, an asset-based loan is secured by leveraging the cost of your tangible assets; anything from accounts receivable to inventory to machines and equipment, and even your trademark.
The cost of your inventory assets determines your borrowing base and also acts as collateral in the event you have to default on your loan. This offers security to the lender, which in turn leads to an easier time securing the loan that you’re seeking.

You have the flexibility to change your growth plans

Asset-based lending (ABL) is super-flexible. It’s not a “one-size-fits-all” solution that you would get with traditional financial loans. Your asset-based loan can be custom-designed to meet the individual needs of your business. What if, for example, your growth plan changes halfway through using your credit line? That’s O.K. As long as you communicate with your lender, and your plan involves a smart direction for business growth, you can grow your credit line and get the support you need. You are not locked into any “one growth” initiative. Asset-based lenders are flexible and here to support your growth, whatever it may be.

Your company is yours – and yours only

This is perhaps the largest benefit of asset-based loans. As opposed to equity financing, you don’t give away a stake in your business and in turn get to keep all the profits and make all the decisions. This benefit speaks for itself. Very simply, with asset-based lending, your business is your own.

Maximum liquidity is always available

A huge perk to asset-based lending – especially in today’s economy – is having the availability to liquidize your assets. Why is this so important in times like these? If you need to convert your assets into cash, you can do so at any time. This isn’t something you can get with traditional loans, which are based on traditional financial metrics. If you’re experiencing high growth due to expansion, an asset-based loan is perfect for your situation.

No commitment issues here

With financial contracts, there is the lingering fear that you could violate the deal and not meet the terms due to uncertain visibility into the future. As stated, not knowing what next week might bring is a scary situation to get locked into during these economic times. As asset-based loans have few covenants, there is little fear of breaching a contract. Since assets can be used as collateral, there is more room to grow.

With so many unique benefits, asset-based lending could be exactly what you need to achieve the growth you want. If you are seeking to gain more working capital for a new venture in your business, reach out to your lender to find out how asset-based lending can help you.

About eCapital

Since 2006, eCapital has been a trusted financial partner for thousands of small to mid-size companies in all stages of development. Our customer base continues to grow as our reputation for reliable funding, dedicated service and effective risk management endures. As a leading industry innovator, eCapital integrates emerging technologies with a forward-thinking approach to solve business problems. Working in collaboration with our clients, eCapital shapes customized factoring facilities to meet the working capital needs and cash flow requirements specific to your business.

For more information about how our experienced team supports businesses’ capital requirements through all stages of development, visit

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eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment financing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit

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