Asset based lending

What is asset based lending?

An ABL facility is a line of credit where the limit moves with your assets. Each month, or each week on larger lines, you report your receivables, inventory and sometimes equipment. The lender applies advance rates to the eligible portion, subtracts ineligible items such as invoices over 90 days, and the result is your borrowing base: the most you can have outstanding that day.

Because the lender watches the collateral closely, it will lend to businesses that are growing fast, turning around, seasonal or thinly profitable, as long as the assets are real. It is the institutional cousin of invoice factoring and inventory financing, usually cheaper and bigger than either.

Who qualifies for asset based lending?

Most ABL lenders want at least $1 million in annual revenue, receivables from business or government customers, accounting systems that can produce an accurate aging and inventory report on demand, and no existing lien on the assets. Profitability matters less than at a bank; losses are acceptable if the collateral covers the line and there is a plan.

• Declined most often: consumer receivables, heavy customer concentration, inventory that is perishable or custom, books that do not reconcile, and receivables already pledged under a UCC lien to another lender.
• Smaller businesses, under about $1 million in receivables, usually fit factoring or invoice financing better.

What does asset based lending really cost?

A typical example: you have $2 million in eligible receivables and $500,000 in inventory. The lender advances 85% on receivables and 50% on inventory, so your borrowing base is $1.95 million. You keep an average of $1.2 million drawn at prime plus 2.5%, about 9.5%, which is $114,000 a year in interest.

Fees add up on top: an unused line fee of 0.25% to 0.5% on the undrawn portion, a collateral monitoring fee of $1,000 to $3,000 a month, field exams once or twice a year at $5,000 to $15,000 each, and a closing fee of 0.5% to 1%. All in, expect an effective cost of 11% to 14%, still far below factoring. See business loan rates explained.

How do you qualify, and what documents do you need?

Beyond the usual two years of tax returns, interim financials, a debt schedule and personal financial statements, ABL lenders want a detailed accounts receivable aging by customer, an accounts payable aging, an inventory listing by category with cost and age, a customer concentration summary, and your last 12 months of sales and collections by month. Before closing they conduct a field exam at your office to test the records.

Our document checklist covers the standard set. The field exam surprises most owners: the examiner samples invoices, matches them to shipping documents and cash receipts, and counts inventory. Clean records mean a bigger advance rate; messy ones mean a smaller one or a decline.

How long does asset based lending take?

Typically two to six weeks from a complete application to the first draw. The field exam and any appraisal of inventory or equipment take one to two weeks and must be scheduled, and the legal documents for a secured revolving facility are longer than for a term loan. Renewals and increases are faster once the lender knows your reporting.

After closing, the line works day to day: you submit a borrowing base certificate, often weekly, and draw against it the same day. See how long business loans take for comparison with other products.

When should you choose something else?

Choose a conventional bank line of credit if your business is profitable enough to qualify, because the monitoring fees and reporting burden of ABL are real costs. Choose invoice factoring if you are under about $1 million in receivables or do not have the accounting staff to produce weekly reports.

Skip ABL if your assets are mostly intangible or your inventory is hard to value. A software company with no receivables to speak of will get a tiny borrowing base and pay full fees for it; revenue based financing or venture debt fit that business better.

How do you apply for asset based lending?

Apply once on this site with your aging and inventory reports, and your application reaches ABL lenders that work at your size, alongside bank lines and factoring companies so you can compare the cost of each structure. It is free for your business, and we are paid the same whichever lender you choose. Or ask your AI assistant to apply through our MCP server: it reads your reports and financials, fills the application and submits it.