Asset-Based Lending (ABL)

Companies with significant accounts receivable, inventory, equipment, or other eligible assets may be able to use those assets to access additional working capital.

Lirodean helps businesses evaluate and secure asset-based lending solutions through banks and specialized asset-based lenders.

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What Is Asset-Based Lending?

Asset-based lending, commonly known as ABL, is a form of business financing secured primarily by the assets of the company.

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Depending on the lender and transaction, eligible collateral may include:

• Accounts receivable

• Inventory

• Equipment

• Machinery

• Certain other business assets

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The amount of credit available is generally determined by the value and eligibility of the assets supporting the facility.

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How Does an ABL Facility Work?

Many asset-based credit facilities operate through a borrowing base.

The lender evaluates eligible assets and applies an agreed advance rate to determine how much credit is available.

For example, accounts receivable may support a different advance rate than inventory.

Eligibility criteria and advance rates vary by lender and transaction.

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Who Can Benefit From Asset-Based Lending?

ABL may be appropriate for:

• Growing companies requiring additional working capital

• Businesses with substantial accounts receivable

• Distributors and wholesalers carrying inventory

• Manufacturers

• Construction-related businesses

• Companies experiencing rapid growth

• Businesses undergoing a transition or restructuring

• Companies whose traditional bank facility no longer supports their capital requirements

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ABL vs. Traditional Bank Financing

Traditional bank underwriting often focuses heavily on historical profitability, cash flow, and debt service coverage.

Asset-based lenders may place greater emphasis on the quality and value of the collateral supporting the credit facility.

For businesses with strong assets but limited conventional borrowing capacity, an ABL structure may provide an alternative financing option.

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ABL vs. Factoring

Although both financing methods may involve accounts receivable, they are structured differently.

Factoring generally involves the purchase of eligible invoices by a factoring company.

ABL typically involves a revolving credit facility secured by eligible accounts receivable and potentially other business assets.

The right structure depends on the company’s size, financial profile, assets, customers, and financing needs.

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What Do ABL Lenders Evaluate?

Asset-based lenders may review:

• Accounts receivable aging

• Customer concentration

• Customer credit quality

• Inventory

• Equipment

• Historical financial statements

• Interim financial statements

• Bank statements

• Existing debt

• Tax returns

• Collateral quality

• Business operations

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Larger transactions may also require field examinations, appraisals, or additional due diligence.

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How Lirodean Helps

Lirodean assists businesses throughout the financing process, from evaluating the appropriate structure to identifying potential lenders and supporting underwriting.

Our objective is to match each financing request with lenders whose criteria align with the company’s financial profile and collateral.

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Explore Asset-Based Financing

If your company has significant accounts receivable, inventory, equipment, or other business assets and requires additional liquidity, asset-based lending may be worth considering.