Question 1

What is asset-based lending (ABL)?

Accepted Answer

Asset-based lending (ABL) is a financing structure where a revolving credit line or term loan is secured by specific business assets — accounts receivable, inventory, equipment, real estate, or securities — rather than primarily on cash flow or credit score. The lender establishes a borrowing base: the maximum you can borrow at any time, calculated as a percentage of eligible collateral. As asset values change, your available credit adjusts. The trade-off is more ongoing reporting than a cash-flow loan — monthly borrowing base certificates, periodic field exams, and tighter lender oversight — in exchange for more capital when your balance sheet is stronger than your income statement.

Question 2

What types of assets qualify as collateral?

Accepted Answer

Eligible ABL collateral includes: accounts receivable (B2B/B2G invoices under 90 days), finished goods and raw materials inventory, equipment and machinery, commercial real estate, marketable securities (stocks, bonds, ETFs), cryptocurrency holdings, and intellectual property (patents, trademarks, copyrights). Accounts receivable and inventory are the most common types in traditional ABL. Each asset class has its own advance rate and eligibility criteria.

Question 3

How much can I borrow — what are the advance rates?

Accepted Answer

Your borrowing capacity is the sum of all eligible collateral, each advanced at a different rate: accounts receivable 80-85% (B2B/B2G, under 90 days, undisputed); finished goods inventory 40-65%; raw materials/WIP 20-40%; equipment 50-80% of orderly liquidation value; commercial real estate up to 75% LTV. Concentration limits apply: if a single customer represents more than 20% of total AR, the excess is typically excluded. Traditional ABL facilities commonly start at $500K-$750K minimum; some specialty or non-bank lenders serve smaller businesses.

Question 4

Who qualifies for ABL and what industries use it most?

Accepted Answer

ABL is best for businesses with significant physical assets but variable or thin cash flow — manufacturers, wholesale distributors, staffing agencies, retailers, logistics and trucking companies, and food and beverage distributors. These industries have large working capital needs, seasonal cash flow, and substantial AR and inventory. Qualification depends more on asset quality and liquidation value than profitability. Businesses in turnaround situations or growing faster than cash flow can support are also common users. Typical minimum is $2M+ in annual revenue, though asset quality matters more than any single metric.

Question 5

How does ABL differ from a traditional cash-flow loan?

Accepted Answer

Cash-flow loans are underwritten on earnings — EBITDA, revenue trends, debt-service coverage, credit score. The lender is betting on your income stream. Asset-based loans are underwritten on what you own — the liquidation value of specific collateral. A business with a large receivables balance or equipment fleet can often borrow more through ABL than a traditional loan, even with weak profitability. The trade-off: ABL costs more (typically 7-17% APR including fees vs. lower for bank cash-flow lines) and requires more monitoring — monthly borrowing base certificates, periodic field exams, and tighter lender oversight. In exchange, you get access to more capital when cash flow alone would not qualify.

Question 6

What is a borrowing base certificate and how often is it required?

Accepted Answer

A borrowing base certificate (BBC) is a periodic report you submit to the lender showing the current value of your eligible collateral and the resulting maximum borrowing amount. For AR-based facilities, BBCs are required monthly or weekly. For inventory: monthly. For equipment or real estate: quarterly or annually. The BBC determines how much of your credit line is available at any given time. Submitting accurate BBCs requires reliable accounting records and a current AR aging report. Many lenders now accept automated feeds from accounting software to reduce the manual burden.

Question 7

What are field exams and what do they cost?

Accepted Answer

Field exams (also called field audits) are on-site reviews conducted by the lender or an independent auditor to verify that the collateral supporting your borrowing base actually exists and matches your records. They check AR aging, inventory counts, and accounting controls. Field exams are required before initial funding and periodically after (every 1-2 years for established relationships, more frequently if availability is tight). Costs are borne by the borrower and typically range from $2,000 to $15,000 or more per exam depending on facility size, collateral complexity, and number of locations. This is a real ongoing cost of ABL that does not appear in the headline interest rate.

Question 8

How does ABL compare to invoice factoring?

Accepted Answer

Both use receivables as the basis for financing but are structurally different. In ABL, you retain ownership of AR and collect from customers yourself — customers are not notified. The AR serves as collateral for a revolving credit line. In invoice factoring, you sell the AR to the factor, who owns it and collects directly from your customers — customers are typically notified. ABL costs less per dollar borrowed (7-17% APR vs. factoring at 1-5% per invoice per 30 days, which can reach 15-60%+ APR) but requires stronger accounting infrastructure, higher asset minimums, and more ongoing reporting. Factoring is faster to set up and easier to qualify for, especially for smaller businesses or startups.

Question 9

How long does it take to get funded?

Accepted Answer

Timeline depends heavily on asset type and facility complexity. AR and inventory revolving lines: 3-8 weeks from application to first funding (expedited deals possible in under 2 weeks for simpler facilities). Equipment-backed loans: 2-4 weeks (requires appraisal). Commercial real estate: 6-12 weeks (title, appraisal, environmental review). Securities-backed lines: as fast as 48-72 hours for established accounts. Complex multi-asset facilities typically take 8-12 weeks. Clean, organized accounting records and AR aging reports significantly accelerate due diligence. Once a facility is established, additional draws fund within 1-3 business days.

Product	Term Loan	Revolving Line	Description
A/R Financing	Rare	Standard	Advance 80–85% against outstanding B2B invoices. Borrowing base updates monthly with your receivables balance.
Commercial Real Estate	Standard	Less Common	Leverage commercial property up to 75% LTV for acquisition, development, or refinancing.
Crypto-Secured Lending	Less Common	Standard	Access liquidity from cryptocurrency holdings without selling your position.
Equipment-Backed Lending	Standard	Less Common	Use existing equipment as collateral — advance rates of 50–80% of orderly liquidation value.
Inventory Financing	Less Common	Standard	Borrow 40–65% against finished goods or 20–40% against raw materials and work-in-process.
IP-Secured Financing	Standard	Less Common	Use patents, trademarks, or copyrights as collateral to fund growth or R&D.
Purchase Order Financing	N/A	N/A	Fund supplier costs to fulfill confirmed purchase orders from creditworthy buyers.
Security-Backed Financing	Less Common	Standard	Borrow against stocks, bonds, or ETFs without selling your investment position.

Qualified By Assets. Not Just Your P&L.

What Is Asset-Based Lending?

Why Asset-Based Lending

Higher Borrowing Capacity

Revolving Availability

Scales With Your Business

Qualify on Asset Strength

ABL Products at a Glance

Advance Rates by Asset Type

Accounts Receivable

Finished Goods Inventory

Raw Materials / Work-in-Process

Equipment & Machinery

Commercial Real Estate

General Qualification

Typical Documentation

Frequently Asked Questions

Related Products & Resources

Ready to Put Your Assets to Work?