Asset-Based Lending
A line of credit backed by what your business owns
Asset-based lending (ABL) turns your receivables, inventory and equipment into working capital. Your line of credit is set by the value of those assets, and it grows as your business grows.
How your line is set
Your accounts receivable, inventory and equipment add up to your borrowing base, which is the size of your line of credit.
How asset-based lending works
- 1
We value your assets.
We review your receivables, inventory and equipment to see what qualifies as collateral.
- 2
We set your borrowing base.
Each type of asset counts at a percentage of its value. The total is your borrowing base, and that is the size of your line.
- 3
You draw what you need.
Borrow against the line when you need cash, and pay it down as your customers pay you.
- 4
Your line moves with your business.
You report on your receivables and inventory on a set schedule, and your borrowing base is updated to match.
What you can borrow against
Accounts receivable
Unpaid invoices from your business customers. Receivables are usually the largest part of a borrowing base, because they turn into cash soonest.
Inventory
Raw materials and finished goods you hold for sale. Inventory counts toward your line alongside your receivables.
Equipment
Machinery and equipment your business owns. Its appraised value can add to what you can borrow.
Factoring or asset-based lending?
Both turn what you are owed into working capital. They work differently, and the right one depends on how your business runs.
What it is
Invoice factoring
You sell your invoices to us
Asset-based lending
A line of credit secured by your assets
Debt on your books
Invoice factoring
None. Factoring is not a loan
Asset-based lending
Yes. ABL is a loan
What approval looks at
Invoice factoring
Your customers' credit, not yours
Asset-based lending
The value of your assets and your financial reporting
How you get cash
Invoice factoring
Paid within 24 hours of submitting an invoice
Asset-based lending
Draw on your line when you need it
Who collects from your customers
Invoice factoring
We do
Asset-based lending
You do
Ongoing reporting
Invoice factoring
Submit invoices as you bill
Asset-based lending
Regular reports on receivables and inventory, plus periodic reviews
Usually fits
Invoice factoring
New and growing companies, including those with limited credit
Asset-based lending
Established companies with steady financials and assets beyond their invoices
Some companies start with factoring and move to ABL as they grow. Because we offer both, we can look at how your business runs and recommend the one that fits.
When ABL makes sense
- Sales are growing faster than your current credit line
- Cash flow swings with the seasons
- Cash is tied up in inventory or equipment
- A large contract, expansion or acquisition to fund
- You want to keep managing your own collections
- You are refinancing an existing line of credit
What to have ready
Asset-based lending looks at your books as well as your customers. These are the documents we usually ask for to get started:
- Recent financial statements
- Accounts receivable and accounts payable aging reports
- An inventory report, if you hold inventory
- A list of your equipment, if it will be part of the line
- Business tax returns
Asset-based lending questions
Is asset-based lending a loan?
Yes. ABL is a revolving line of credit secured by your business assets, so it shows as debt on your balance sheet. Factoring is different: you sell your invoices, so it is not a loan.
How is the size of my line decided?
By the value of the assets you pledge. Each type of asset counts at a percentage of its value, and the total is your borrowing base. As your receivables and inventory grow, so does what you can borrow.
What can I use the money for?
Most working capital needs: payroll, inventory, equipment repairs, taking on a large contract, or covering a seasonal dip in sales.
How is ABL different from a bank line of credit?
A bank usually lends based on your profit history and cash flow. ABL is based mainly on the value of your assets, so it can fit a company that is growing quickly, going through a change or carrying a lot of inventory.
Who collects from my customers?
You do. With ABL you keep managing your own invoicing and collections. With factoring, we handle receivables management and collections for you.
What reporting is involved?
You send regular reports on your receivables and inventory, which keep your borrowing base current. Expect periodic reviews of your books and collateral as well.
Should I choose factoring or ABL?
It depends on how your business runs. Factoring fits companies that want funding on each invoice and collections handled for them. ABL fits established companies with steady financial reporting and assets beyond their invoices. Call us and we will walk through both.
Talk to us about asset-based lending
Tell us what your business owns and what you need the line for. We will come back to you with a real answer, and if factoring is the better fit, we will tell you that too.
Prefer to talk it through? Call 800-709-7393.
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