As a business owner, you don't always have the funds you need when you want to grow. Whether you need to buy more equipment, expand your facility, or increase your inventory, it takes capital to get there. Asset-based lending lets you unlock money that is already sitting inside your business.
What Is Asset-Based Lending?
It's common for a lender to require collateral when you apply for a loan or line of credit. Rather than pledging your vehicle title or taking a second mortgage on your home, asset-based lending (ABL) lets you use your business assets to secure the financing — anything from property to inventory to accounts receivable.
Asset-based lenders provide loans against those business assets, and they typically move much faster than traditional banks, which can take weeks or months to approve a loan. Your eligibility is determined by the qualifying assets your business currently holds.
Term Loan or Revolving Line — Your Choice
Some ABL facilities are set for a specific period — generally two to five years. Others run as a continuing line of credit that varies with a borrowing base: the underlying assets, like receivables, that fluctuate over time. A line secured by your assets works like a cash reserve you can draw on again and again — similar to a business credit card, but with a much larger limit — so funds are available when you need them instead of reapplying for a loan each time.
The Advantages
The biggest benefit of working with an asset-based lender is speed — you get money when you need it, without waiting out a lengthy bank approval. ABL does come with fees, but you won't pay the high rates or the steep charges that often come with factoring. It's a solid alternative to traditional financing, especially for companies rich in assets but tight on cash. (We once used a manufacturer's existing equipment to close a $2M sale-leaseback in about three weeks.)
What to Watch Out For
Be thoughtful about how much you finance this way. Larger facilities can carry strict requirements — including lender audits and reporting you may not be prepared for. And as with any loan, your rate will reflect your business's financial condition and, sometimes, the owner's personal credit.
The Takeaway
If your business owns equipment, inventory, real estate, or receivables, you may be sitting on capital you can't see. The right structure turns those assets into growth funding without giving up equity.
Want to know what your assets could unlock? Call 914.419.3059, email mike@ntibfin.com, or book a free consultation.