Asset-based lending

Asset-based lending (ABL) is a way for you to finance rapid growth or large contracts, using your existing assets as security. These assets might include invoices (debtors), inventory, equipment, machinery, commercial property and intangible assets such as Intellectual Property (IP).

Asset-based lending (ABL) allows you to release cash that’s tied up in your balance sheet. Typically, an asset-based loan is a structured combination of invoice finance and a business loan (e.g. invoice discounting or factoring alongside an unsecured business loan).

It used to be a last resort for businesses unable to find lending elsewhere but it’s since lost these negative overtones.

Here are some scenarios where ABL could be useful:

• you’re an established company looking to fund a large project, a management buyout (or buy-in) or international expansion 
• you’re a fast-growing, profitable business with lots of assets (especially debtors) looking to raise funds for new orders, recruit, invest or ease your day-to-day cash flow 
• you’re a startup looking for a more flexible alternative to, say, an overdraft.

Because loan sizes for asset-based lending are usually large, there are fewer lenders at this higher end of the market, but there are several benefits:

• lenders are more likely to take a bespoke view of your business rather than a tick-box approach 
• you’ll get finance more quickly than with other options
• there are fewer restrictions on how you spend the money 
• because the invoice finance part of ABL is tied in tied to the value of your accounts, the amount of finance can increase in line with sales there’s no need to rewrite the underwriting process, so you can grow faster than with, say, an overdraft facility.

You might also want to consider order finance and invoice finance.