Asset Based Loans (ABL)
Rates starting at 7% – 17%*
An asset-based loan (ABL) is a flexible revolving credit facility or term loan secured by a company’s working capital assets—most commonly accounts receivable and inventory, and occasionally machinery, equipment, or real estate. Instead of relying primarily on profitability or historical cash flow to determine borrowing capacity, ABL lenders focus heavily on the liquidation value and quality of the underlying collateral.
Key Features:
- Asset-based lending provides financing to businesses by leveraging their existing assets, such as inventory or receivables, as collateral to secure loans.
- This type of financing is primarily used by small to mid-sized businesses to meet temporary cash flow needs.
- Lenders prefer highly liquid collateral, which can be easily converted to cash, reducing loan risk.
- Loans secured by physical assets are often perceived as riskier, resulting in a lower loan amount — typically 65% to 75% of the asset’s book value as Loan-to-Value (LTV).
- Interest rates for asset-based loans are generally lower than those for unsecured loans due to the reduced risk for lenders.
- Asset based loans provide loans based on the properties value or cash flow.