Asset-Based Loans (ABL) are a type of financing that allows businesses to secure funding by using their assets—such as accounts receivable, inventory, or equipment—as collateral. This option is particularly beneficial for businesses that may not qualify for traditional loans due to limited credit history or cash flow challenges. With ABL, businesses can access working capital based on the value of their assets, rather than their creditworthiness, allowing them to maintain operations, fund growth, or manage cash flow gaps.

How Do Asset-Based Loans Work?

In an asset-based loan, a business pledges its assets as collateral for the loan. The lender evaluates the value of these assets to determine the loan amount, which is typically a percentage of the asset value. Businesses can then access the funds and repay the loan over time, with interest. The loan amount grows as the business’s assets, such as receivables or inventory, increase, providing more working capital. ABLs are ideal for businesses with substantial assets but fluctuating cash flow, as they offer more flexible and accessible funding options than traditional loans.