What is Asset Based Lending (ABL)?

Asset-based lending (ABL) is a type of business financing where loans or lines of credit are provided to companies based on the value of their assets. These assets, which serve as collateral for the loan, can include accounts receivable, inventory, equipment, and sometimes even real estate. The loan amount is typically a percentage of the appraised value of the secured assets.


ABL is particularly useful for companies that need working capital to support their operations, growth initiatives, or to manage cash flow fluctuations. Unlike traditional unsecured loans, which rely heavily on the creditworthiness of the borrower, asset-based loans focus on the liquidity of the collateral assets. This makes ABL a viable option for businesses that might not qualify for traditional bank loans due to stringent credit requirements.


The key advantage of asset-based lending is its flexibility; the borrowing base can be adjusted based on changes in the value of the collateral assets, providing companies with access to capital that grows in line with their assets. This form of lending is especially popular among businesses with significant investments in inventory or accounts receivable, such as manufacturing, wholesale, retail, and distribution companies.

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