Some businesses have value tied up across several areas of their balance sheet – money owed by customers, stock sitting on shelves, and machinery or property supporting the operation. The problem is that many traditional funding solutions only look at one of those assets.
Asset Based Lending (ABL) takes a broad view – instead of relying on a single source of security, it combines funding against debtors, stock and fixed assets to create a larger, more flexible facility that reflects the true strength of the business.
Asset Based Lending is one of the most specialist areas of commercial finance – the structure of the deal often matters just as much as the lender.
When you work with Able Commercial Finance, you benefit from:
Not every lender offers Asset Based Lending and not every facility is structured in the same way. Our role is to identify the right lender and the right structure for your business.
Think of Asset Based Lending as three funding facilities working together.
The first element is receivables finance, where funding is released against your sales ledger. Instead of waiting 30, 60 or 90 days for customers to pay, you can access a large percentage of the invoice value immediately.
The second element is stock finance. Lenders can provide funding against raw materials, work in progress or finished goods, helping businesses unlock cash that would otherwise remain tied up in inventory.
The third element is funding secured against fixed assets such as machinery, plant, equipment or commercial property. This may take the form of a term loan or revolving facility.
By combining these elements, lenders can often provide significantly larger facilities than would be available through a standalone loan or overdraft. Each part of the facility is secured against a different asset class, allowing lenders to take a more complete view of the business.
Asset Based Lending typically suits established businesses with turnover above £2 million and a meaningful mix of debtors, stock and physical assets. While there are exceptions, very small businesses or those with limited asset bases are often better suited to alternative forms of finance.
Invoice Finance – Invoice finance is a common method of asset-based lending where businesses can borrow against their outstanding invoices. This can include:
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 – Land holdings 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.
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.
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.
Asset Based Lending is particularly effective for:
It’s generally less suitable for service businesses that hold little or no stock and have few physical assets. In these situations, other funding solutions may provide a simpler and more cost-effective route.
One of the most common situations we see is a business that looks strong overall but fails traditional lending criteria because no single asset category tells the full story. Asset Based Lending allows lenders to consider the complete picture.
We start by understanding your business, your objectives and your current funding arrangements.
We review your debtor book, stock levels, fixed assets and wider funding requirements to understand whether Asset Based Lending is the right fit.
We approach suitable lenders and structure a facility that reflects the full value of your business assets.
We remain involved throughout the process and continue to support you as your business grows and your funding needs change.
Explore your asset-based lending options today! Contact us to learn more about how we can support your financial journey.
Invoice finance only releases funding against your sales ledger, whereas asset Based Lending combines invoice finance with funding against stock and fixed assets, creating a larger and more flexible facility.
There is no fixed minimum, but lenders generally look for meaningful stock holdings that can be independently valued and monitored. The higher the quality and value of the stock, the more likely it is to form part of an ABL facility.
Often, yes. Many businesses use Asset Based Lending to refinance overdrafts, term loans and other facilities into a single funding structure that better reflects their asset base.
The timescale depends on the complexity of the facility and the assets involved. Straightforward cases can complete within a few weeks, while larger facilities requiring valuations and due diligence may take longer.
If your business has value tied up in debtors, stock and fixed assets, Asset Based Lending could provide significantly more flexibility than a traditional loan or overdraft.
