Asset-Based Lending: How ABL Works & Best Use Cases for Companies

Many companies sit on valuable assets while struggling with day-to-day cash flow. Receivables grow faster than cash collections, inventory ties up working capital and owned equipment or property remains under-utilised as a source of funding. At the same time, traditional unsecured loans can be hard to obtain or too slow to be useful.

Asset-based lending offers an alternative. Instead of judging a borrower only on historical profits and unsecured balance sheet strength, lenders advance funds against specific, ringfenced assets such as receivables, inventory, machinery or real estate. The result is a facility that is anchored in tangible collateral and structured directly around the business model.

This guide explains what asset-based lending is, how it works in practice and when it can be a strategic tool for working capital, growth or restructuring. It also sets out how Financely Group connects companies with lenders that specialise in flexible, asset-backed facilities.

What Is Asset-Based Lending?

Asset-based lending, often shortened to ABL, is a form of financing where a lender provides capital secured directly against a company’s assets. Instead of relying only on unsecured cash flow and covenants, the lender focuses on the quality, value and liquidity of the assets pledged as collateral.

Eligible assets typically include:

• Accounts receivable: Trade receivables from creditworthy customers, usually with clear payment terms and performance history.
• Inventory: Finished goods, raw materials or work in progress that can be valued and sold.
• Equipment or machinery: Plant, vehicles and specialised equipment with a demonstrable resale or appraisal value.
• Real estate or property: Owner-occupied or investment properties that can secure a portion of the borrowing base.

Key characteristics of ABL facilities:

• Loan amounts are tied to a percentage of the appraised or eligible asset value.
• Structures can be revolving for working capital or term-based for specific investments.
• Facilities are often faster to arrange than traditional unsecured loans where assets are strong.
• Proceeds are typically used for working capital, growth funding or recapitalisation.

How Asset-Based Lending Works

While each lender has specific processes, most ABL transactions follow a similar sequence, starting from asset identification and moving through monitoring arrangements.

1. Identify Eligible Assets

The first step is to identify which assets can support a facility. Common examples include:

• Trade receivables from diversified, creditworthy customers with predictable payment patterns.
• Inventory that is not obsolete, restricted or uniquely tailored to a single buyer.
• Equipment and machinery that can be independently valued.
• Commercial property that can provide additional security or a separate borrowing base.

Companies work with advisers and potential lenders to determine which assets are acceptable, how they will be valued and what data is required for ongoing reporting.

2. Apply for the Loan

Once the asset pool is defined, the company submits an application to lenders that provide ABL facilities. Documentation usually includes:

• Historical financial statements and management accounts.
• Detailed aged receivables reports.
• Inventory listings and stock reports.
• Asset registers, equipment lists and any existing valuations.
• Information on customers, suppliers and key contracts.
• A summary of funding needs and intended use of proceeds.

3. Lender Evaluation

The lender then evaluates asset quality, concentration and liquidity. This can involve:

• Reviewing customer credit profiles and payment histories.
• Assessing inventory turn rates and obsolescence risk.
• Commissioning equipment or property valuations.
• Analysing the industry, business model and management team.

Based on this assessment, the lender sets advance rates, such as a percentage of eligible receivables or inventory, and defines any exclusions or reserves.

4. Loan Disbursement

Once the facility is approved and security is in place, funds are advanced according to the agreed borrowing base. In a revolving ABL structure:

• The borrowing base is recalculated periodically as receivables and inventory levels change.
• The company can draw and repay within agreed limits as working capital needs fluctuate.

In a term-type ABL facility, a fixed principal amount is advanced, secured against specific assets, and repaid over an agreed schedule.

5. Repayment

Repayment structures vary depending on facility type. Common approaches include:

• Regular interest payments with amortisation linked to cash flow.
• Reductions in the facility limit as receivables are collected or inventory is sold.
• Bullet repayments tied to specific asset sales or refinancing.

Because the loan is asset-backed, lenders typically monitor collateral through periodic reporting and, in some cases, field exams or audits.

Benefits of Asset-Based Lending

1. Access Capital Quickly

Once a lender understands the asset base and has security in place, ABL facilities can often be put in place faster than unsecured term loans. The underwriting process leans heavily on asset quality, which is easier to verify than long-term forecasts alone.

2. Flexible Use of Funds

Proceeds from an asset-based facility can be applied to working capital, inventory purchases, expansion, acquisitions or restructuring, subject to agreed purposes. This gives management more freedom to deploy capital where it is most needed, rather than being tied to narrowly defined projects.

3. Preserve Equity

Asset-based lending allows businesses to unlock capital without issuing new shares or giving up control. Owners and existing investors retain their position while the company uses existing assets more actively to fund growth and operations.

4. Supports Growth

As a company grows its receivables and inventory, the borrowing base can increase. That means the facility can scale with the business, provided collateral quality and concentration remain within lender parameters. This is particularly useful in sectors where sales growth outpaces internally generated cash.

5. Improves Liquidity

ABL converts non-cash items on the balance sheet into immediately usable capital. Instead of waiting thirty, sixty or ninety days for customers to pay, or for inventory to cycle fully, companies can access a portion of that value today and keep operations moving.

Who Can Benefit from Asset-Based Lending?

Asset-based lending is relevant across a wide range of sectors where tangible collateral and receivables are central to the business model. Common beneficiaries include:

• SMEs with significant receivables or inventory: Manufacturers, wholesalers and distributors that sell on credit terms and hold stock.
• Companies with seasonal cash flow: Businesses with peak seasons that need flexible funding to build inventory or manage receivables.
• Growing businesses: Firms scaling into new markets or adding customers faster than internal cash flow allows.
• Companies unable to secure traditional bank loans: Borrowers with strong assets but weaker historic earnings or temporary pressure on ratios.
• Businesses needing short-term liquidity: Companies looking to refinance more expensive debt, pay down arrears or restructure around a cleaner balance sheet.

Best Use Cases for ABL

Asset-based lending is most effective when it is aligned with specific operational and strategic objectives.

• Financing receivables to accelerate cash flow: Converting credit sales into immediate liquidity so the business can pay suppliers, staff and overheads on time.
• Funding inventory purchases: Building stock ahead of high-demand periods without straining existing facilities.
• Supporting growth without new equity: Funding expansion in capacity, markets or product lines using collateral rather than share issuance.
• Covering short-term operational expenses: Managing temporary squeezes caused by customer delays, supply chain disruption or unexpected costs.
• Refinancing existing debt: Replacing unsecured or high-cost borrowings with a structured, asset-backed facility where collateral supports better pricing or terms.

Why Choose Financely Group for Asset-Based Lending

The ABL market spans banks, specialist asset-based lenders, private credit funds and regional providers. Each has different preferences around asset classes, geographies, ticket sizes and industries. Matching a specific business to the right lender group is critical.

Financely Group works with companies that want to use ABL strategically rather than as a last resort. Through regulated partners, we:

• Review the asset base, business model and funding objectives to assess whether ABL is suitable.
• Identify lenders with a track record in receivables finance, inventory-backed facilities, equipment loans or property-supported ABL at the required size.
• Help prepare focused data packs that cover receivables ageing, customer profiles, stock reports and asset registers in a format lenders expect.
• Support negotiation of advance rates, borrowing base eligibility rules, reserves, reporting requirements and pricing.
• Assist in coordinating legal, valuation and operational steps to bring the facility from indicative offer to live funding.

The aim is to create an asset-based facility that fits the business, supports growth and avoids unnecessary complexity or risk.

Apply for Asset-Based Lending Today

If your business holds receivables, inventory, equipment or property that is not yet part of your funding strategy, an ABL facility may unlock capital that can be used for growth, working capital or restructuring. The key is to understand which assets qualify, what advance levels are realistic and how the facility should sit alongside other financing.

An early review of asset-backed options can help management plan ahead rather than waiting until a cash crunch forces a rushed decision.

Asset-Based Lending: Common Questions

Disclaimer: This page is for general information only and does not constitute legal, tax, accounting or investment advice. Financely Group acts as advisor and arranger through regulated partners and is not a bank or direct lender. Any asset-based lending facility, working capital loan, trade finance, project finance or capital raising solution is subject to underwriting, KYC, AML, sanctions screening, legal review, documentation, perfected security and approvals by relevant stakeholders. No public offer or solicitation is made on this page.