Asset Based Lending (ABL)
Funding for Business Growth and Working Capital
Asset Based Lending (ABL) is a flexible and reliable financing option designed to help businesses unlock cash flow by leveraging the value of their assets. Whether you are looking to finance day-to-day operations, fuel growth, or expand into new markets, Asset Based Lending provides the liquidity your business needs to thrive.
What is Asset Based Lending (ABL)?
Asset Based Lending (ABL) involves providing loans or funding lines secured against specific business assets rather than relying on the overall balance sheet or creditworthiness. These assets can include:
Accounts receivable (Debtors): Loans are secured against unpaid invoices, allowing businesses to access working capital by discounting their receivables.
Inventory or Stock: Businesses can raise funds by securing financing against the value of their stock, helping them maintain operations and manage fluctuations in demand.
Fixed assets: This includes plant, machinery, and other long-term assets, enabling businesses to release cash by refinancing their capital equipment.
Cashflow: In certain cases, financing is extended based on the company's projected or existing cash flow, making it an ideal solution for growing businesses that may not yet have substantial assets.
How Does Asset Based Lending Work?
With Asset Based Lending, businesses can unlock funding from their existing assets to support their working capital needs, expansion efforts, or acquisitions. Instead of having to provide a personal or corporate guarantee, businesses pledge specific assets as collateral. This means that the financing provided is closely aligned with the strength and value of those assets.
✔️Key Features of Asset Based Lending Include:
Receivables / Invoice Discounting: Businesses can unlock capital by selling or discounting their outstanding invoices, providing immediate access to cash rather than waiting for clients to settle.
Stock Financing: Financing can be arranged based on the value of a company’s stock, giving companies the flexibility to manage their inventory while ensuring sufficient liquidity.
Fixed Asset Refinance: Businesses can raise capital by refinancing their plant and machinery or other long-term assets, which can be a particularly useful option for businesses investing in new equipment.
Cashflow Lending: If a business’s cash flow is strong, it can secure funding even without significant physical assets, making it a great option for rapidly growing companies or those with high turnover.
❓Why Choose Asset Based Lending?
Improved Cash Flow Management: ABL allows businesses to unlock capital from assets they already own, freeing up cash flow to meet operational needs and take advantage of growth opportunities.
Flexible Funding: ABL can be tailored to suit the specific needs of your business, whether it's for general working capital, equipment purchases, or expansion into new markets.
Support for Turnarounds and Acquisitions: Asset Based Lending is often the preferred choice in acquisition and turnaround situations. It offers businesses the financial flexibility to navigate challenging circumstances and capitalise on new opportunities.
Faster Access to Funding: Compared to traditional loans, ABL provides quicker access to capital, making it an ideal solution for businesses needing rapid financial support.
👩💼Applications of Asset Based Lending:
Working Capital Financing: ABL is an ideal solution for businesses that need immediate access to capital to cover operational expenses like payroll, rent, and supplier payments.
Business Expansion: Whether you are entering a new market or launching a new product, ABL helps to finance expansion initiatives by unlocking value from existing assets.
Acquisitions: For businesses looking to acquire others, ABL can provide the necessary funding, leveraging the assets of both companies.
Turnaround Situations: When a business is facing financial distress, ABL can provide the breathing room needed to stabilise operations and implement a recovery plan.
🅰️Advantages of Asset Based Lending:
Faster, Flexible Financing: Unlock funding more quickly than through traditional loans.
Lower Risk: Lending is secured against valuable business assets, reducing the risk for both the lender and borrower.
Optimised for Growth: Perfect for businesses experiencing rapid growth or needing financing to capitalise on opportunities.
Improved Cashflow: Access to working capital without the need for traditional forms of collateral.
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Businesses can use a range of assets to secure financing, including:
Accounts receivable (invoices and outstanding debts)
Inventory or stock
Fixed assets (e.g., machinery, property, equipment)
Cashflow (in some cases)
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Unlike traditional loans, which are typically secured by personal guarantees or rely on your company’s overall credit rating, Asset Based Lending allows businesses to secure funding based on the value of specific assets. This can result in more flexible and faster access to capital.
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The costs can vary depending on the type of asset being used as collateral, the amount of financing needed, and the terms of the lending agreement. Typically, the costs include interest rates, fees for appraisal or due diligence, and possibly a percentage of the total value of the assets used.
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Asset Based Lending is often used by businesses that have valuable assets but may not have the credit history required for traditional financing. It is particularly useful for:
Growing businesses
Companies facing cash flow issues
Businesses undergoing restructuring or turnaround
Companies involved in mergers and acquisitions
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One of the key benefits of Asset Based Lending is the speed of funding. Since the loan is secured against existing assets, approval times can be faster than traditional loans, and businesses can access funds within a matter of days rather than weeks.
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Asset Based Lending can benefit a wide range of businesses, from small enterprises to large corporations, across various industries. If your business has valuable assets but needs working capital, ABL could be an ideal solution. Contact us today for a free consultation to discuss how we can tailor an ABL solution for your specific needs.