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Navigating Financial Challenges: Asset-Based Lending’s Impact on F&B Agility

Last Modified : Apr 17, 2024

Fact-checked by: Bruce Sayer

After three years of declining volumes, food and beverage manufacturers and distributors are staged for an upcycle. Circana, a recognized leader in tracking consumer behavior and market information, predicts modest growth in 2024. Investors and stakeholders are optimistic for increased volumes and improved margins through the remainder of the decade, as resilient consumer spending drives demand and technology-driven processes enhance efficiencies, product innovation, and scaling.

However, capitalizing on this increasing demand remains challenging amid shifting consumer preferences and evolving market dynamics. Agile F&B manufacturers and distributors with stable financial structures and the ability to adjust quickly to emerging trends will be best positioned to succeed in a transforming market.

In this article, we discuss the advantages of asset-based lending (ABL) in establishing a robust yet flexible financial structure to achieve agility and resilience in an industry confronted by changing consumer preferences and shrinking margins.

Changing consumer demand

The pandemic and post-pandemic eras have significantly changed lifestyles and the cost of living. The F&B industry must be agile to align with evolving consumer demand, driven by value-based preferences such as sustainability, health consciousness, and price point.

Sustainability, health consciousness: Product offerings must adapt to changing consumer preferences for healthier and more sustainable choices. Consumers, particularly younger generations, are scrutinizing labels for simpler ingredients and sustainable options.

The food and beverage industry must prioritize simpler ingredients, sustainable sourcing, and innovative products, requiring investments in R&D to meet evolving consumer preferences.

Price point: With costs on the rise, the average American household now needs $11,434 more annually to maintain their standard of living compared to two years ago. Consumer prices rose 3.2% from February 2023 to February 2024, with food costs up 2.2%.

F&B companies must ensure their offerings are priced right to provide strong perceived value for money and quality. Investing in operational efficiencies is essential to streamline processes and control costs to maintain competitive pricing with improved profit margins.

Rapid deployment of R&D and systematic efficiencies is essential to stay at the forefront of the market as demand changes. Business agility is required to quickly adapt and respond to changes in the market, technology, or internal processes while maintaining efficiency and effectiveness. Strategic investments in these areas often require capital expenditures that exceed the resources of under-capitalized F&B companies. This is where asset-based lending provides essential financing options and flexible terms aligned with the business’s ability to pay.

Understanding asset-based lending solutions

Asset-based lending (ABL) has emerged as a mainstream funding option and a preferred source of flexible financing for under-capitalized businesses to gain access to working capital when needed. It is a type of financing where loans are secured against a company’s assets, such as inventory, accounts receivable, or equipment. Unlike traditional loans, which primarily consider credit history and profitability, ABL focuses on the value of the collateral assets, offering a lifeline to businesses with solid operational foundations but perhaps less impressive financial statements. This approach provides a cushion against the financial unpredictability inherent in the F&B sector.

Understanding how to leverage ABL’s strategic advantages to maximize agility can be a competitive advantage for F&B companies that want to stay at the forefront of the market.

The strategic advantages of asset-based lending

The overall strategic advantages of ABL can be summed up in two words: stability and flexibility.

Stability: ABL provides companies with a loan or line of credit based on the value of their assets. The amount of credit available typically depends on a percentage of the appraised value of the secured assets. Experienced and reputable lenders in this category typically provide high evaluations and advance rates to maximize access to capital.

This financing method is particularly beneficial for underperforming companies with diminished credit histories as it stabilize financial structures, enhances cash flow and grants access to  working capital without the need to dilute equity.

Flexibility: ABL is a flexible solution that adapts to the borrowing needs of the company:

  • Streamlined approvals, efficient onboarding, and straightforward funding processes deliver the capital you need when needed.
  • Terms can be customized to align with the company’s ability to pay.
  • Minimal loan covenants and lender oversight empower companies to control how funds are used.
  • No minimums mean companies can adjust funding as seasonal demands fluctuate.
  • Expandable credit limits are designed to accommodate the company’s growth rate.

Credit facilities up to $50M

Through ABL solutions, companies can stabilize their financial structures while investing in operational efficiencies, product R&D, and enhanced marketing initiatives to outperform competitors. As growth opportunities arise, the flexible nature of ABL enables companies to expand into larger markets, construct new facilities, or pursue M&A opportunities. ABL keeps pace with growing capital needs with up to $50 million credit facilities.

A Real-World Example: Pegasus Food’s Turnaround Story

Pegasus Foods, a frozen food manufacturer based in Rockwall, Texas, faced significant financial challenges while relocating from Los Angeles. Seeking assistance, the family-owned company turned to a private equity group but still encountered ongoing difficulties. As the company struggled with cash flow issues, adapting to a new location and covering unforeseen expenses, it looked for a flexible financing partner who could understand its unique situation.

Vicki Kraft, the CFO of Pegasus Foods, described the critical need at the time, stating, “One of the first things we had to do was refinance our loan and find a lender who understood the complexities of our turnaround situation and a partner who would be flexible with some of the unknowns that we were facing.”

To overcome its financial hurdles, Pegasus Foods enlisted the help of eCapital, a leading asset-based lender. With eCapital’s support, the company refined its product lineup, streamlined operations, and secured funding for its turnaround. The partnership enabled Pegasus Foods to develop a growth strategy, capitalize on market opportunities, and navigate industry-specific cash flow challenges. Vicki praised eCapital’s tailored solutions, agility, and understanding of their business needs.

Their collaboration exemplifies the benefits of specialty lenders in addressing unique financial situations and fostering business growth.

Click here for a more detailed account of Pegasus Food’s journey from financial distress to recovery and growth.


F&B businesses must be agile and adapt to evolving consumer preferences in a price-sensitive environment. Fast adaptation to capitalize on emerging consumer trends provides a competitive advantage. Reducing costs and optimizing operations to improve margins while advancing innovation, maintaining quality, and being price-conscious is paramount to success.

Flexible financial structures, such as ABL are crucial for accessing the working capital needed to optimize operations, innovate products, and fund growth initiatives. ABL offers stability and flexibility, providing quick access to capital and tailored financing terms to meet the company’s needs.

As F&B businesses navigate the challenges of operating within slimmer margins in 2024, success will favor those with the financial stability and agility to adapt quickly and efficiently to emerging market trends and opportunities.

Contact us today to learn about our creative asset-based lending solutions to support companies overcome financial challenges and foster long-term success.

Key takeaways

  • Despite recent challenges, the U.S. food and beverage industry is predicted to experience modest growth in 2024 with increased volumes and improved margins through the remainder of the decade.
  • Evolving consumer demand, driven by value-based preferences such as sustainability, health consciousness, and price point, will require agile responses from F&B operators to maintain competitiveness in the market.
  • Agile F&B operators with stable financial structures will be better positioned to adapt quickly to emerging market trends and capitalize on growth opportunities.
  • Understanding the strategic advantages of asset-based lending can provide F&B businesses with the flexibility and stability needed to navigate financing challenges and stay ahead of the competition.
  • Leveraging ABL solutions enables F&B companies to optimize operations, innovate products, and fund growth initiatives.


ABOUT eCapital

Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.

We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.

Matt Debernardo Headshot

Matt DeBernardo, SVP, Business Development Officer, is an accomplished finance professional with over 15 years of experience in alternative finance. In his role, he is responsible for structuring creative, flexible asset-based lending solutions that maximize working capital.

Prior to joining eCapital, Matt held senior positions at Alterna Capital and LSQ, where he was a top producer. His commitment to the alternative finance industry is evident in his active participation in the Secured Finance Network as a board member for the Florida chapter, and a member of many other industry organizations such as the Association for Corporate Growth and the Turnaround Management Association.

Matt earned a Bachelor of Science degree (honors) in Finance from Bentley University and is a graduate of the General Electric Financial Management Program.

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