Able

What is Asset-Based Lending?

Asset-based lending (ABL) is a financing option that allows businesses to secure funding by leveraging their tangible and intangible assets. Essentially, lenders provide loans or lines of credit based on the value of your company’s assets, which can include inventory, accounts receivable, commercial property, and equipment. It normally maximises the amount of cash available to a business by pooling many assets together. It can be simpler than utilising multiple finance agreements and is often used to assist with acquisition funding, MBO’s, MBI’s or restructuring where cash availability is paramount to success.

Why Choose Asset-Based Lending?

Flexibility: ABL provides businesses with a flexible source of financing, allowing for tailored solutions to meet specific needs.

Quick Access to Cash: Leveraging assets can expedite the loan approval process and provide quicker access to capital.

Improved Cash Flow: By unlocking funds tied up in assets, businesses can better manage their cash flow and seize growth opportunities.

Types of Assets Used in Asset-Based Lending

Invoice Finance

Invoice finance is a common method of asset-based lending where businesses can borrow against their outstanding invoices. This can include:

Factoring: Selling invoices to a third party at a discount for immediate cash.

Invoice Discounting: Borrowing against the value of invoices while maintaining control over the sales ledger.

Commercial Property

Commercial property can serve as a significant asset for securing loans. Whether it’s an office building, warehouse, or retail space, lenders often assess the property’s market value to determine the financing amount.

Stock

Inventory is another valuable asset that can be leveraged in asset-based lending. Businesses can obtain funds based on the current value of their stock, helping them to maintain operations and manage seasonal fluctuations.

Land

Landholdings can also be used as collateral for loans. This is especially useful for businesses in industries like agriculture, real estate, or other sectors where land value can be substantial.

Machinery

Equipment and machinery used in production processes can offer immediate cash flow options. Lenders assess the depreciated value of the machinery to determine usable equity for financing.

Cash Flow Loans

Cash flow lending focuses on a business’s projected cash flow rather than traditional collateral. This type of financing is beneficial for companies with strong, consistent revenues but limited tangible assets. It provides immediate liquidity to enhance business operations.

Benefits of Asset-Based Lending

Preserves Ownership: ABL allows business owners to retain equity while accessing necessary funds.

Support for Growth: It enables companies to make strategic investments, enhancing productivity and market positioning.

Customisable Terms: Financing structures can be tailored to match the unique needs of businesses.

Is Asset-Based Lending Right for You?

Asset-based lending can be a strategic choice for many businesses. If you have valuable assets but face cash flow challenges, ABL can provide the working capital necessary to thrive. It’s essential to evaluate your business’s financial health and consider consulting with a financial advisor to explore the best options available.

Conclusion

Whether you’re looking to strengthen your cash flow, invest in new equipment, or maximise the potential of your inventory, asset-based lending can be a powerful tool. With various asset types eligible for financing, it’s easier than ever to capitalise on your current resources and foster your business’s growth.