Asset-based Lending at Northern Trust

Northern Trust's Asset-based Lending (ABL) offering is engineered to provide disciplined, flexible financing anchored by the value of readily monetizable assets. It is designed for companies that require working capital, seasonal financing, acquisition funding, or balance sheet optimization and that want a lending solution aligned with tangible collateral values. The program combines deep credit expertise, rigorous collateral monitoring, and tailored structuring to help businesses preserve liquidity and pursue strategic initiatives with confidence.

Core Features

• Collateral-focused credit: Facilities are secured primarily by accounts receivable, inventory, equipment, and other allowable tangible assets, with borrowing capacity calculated against advance rates based on asset quality.
• Flexible structures: Revolving lines, term loans, delayed draw facilities, and unitranche solutions can be incorporated to match cash flow profiles and transactional needs.
• Transparent eligibility and advance rates: Clear asset eligibility criteria and advance rates reduce uncertainty and support predictable access to capital.
• Comprehensive reporting: Regular borrowing base statements, collateral audits, and online access to account information provide timely visibility into availability and compliance.
• Custom covenants and controls: Covenants and reporting are calibrated to client circumstances to balance risk mitigation with operational flexibility.

How the Facility Works

The ABL facility is typically established on a borrowing base mechanism. Eligible assets are identified and evaluated, and advance rates are applied to determine the maximum borrowing capacity. Borrowing base certifications—often monthly—allow the lender and borrower to reconcile collateral levels and adjust availability. This model enables dynamic borrowing capacity that grows and contracts with the underlying asset base, providing companies with a capital line that reflects their operational performance.

Types of Eligible Collateral

Northern Trust accepts a wide range of collateral classes tailored to enterprise needs. These commonly include:

• Accounts receivable: Invoiced, credit-worthy receivables from approved buyers, often concentrated in business-to-business markets.
• Inventory: Finished goods, raw materials, and work-in-process that are stored, controlled, and properly insured.
• Equipment and machinery: Commercial equipment with marketable resale value and clear title.
• Cash and short-term investments: Pledged deposits or investment accounts that can be easily liquidated.
• Other tangible assets: Select intellectual property, real estate, or specialized assets may be considered where valuation and liquidity support lending parameters.

Risk Management and Monitoring

ABL at Northern Trust is underpinned by rigorous risk management processes. Collateral valuation and eligibility are governed by conservative policies and industry-standard discounts. Regular asset-based reporting, field examinations, and third-party audits ensure collateral integrity. Dedicated credit teams combine industry experience with quantitative analysis to monitor borrower performance, manage concentration risk, and adjust facility terms as necessary. This active oversight helps preserve lender and borrower interests across economic cycles.

Industries Served

The product is well-suited to a range of sectors where tangible assets form the backbone of working capital. Typical industries include manufacturing, wholesale distribution, consumer products, healthcare supplies, technology hardware, capital goods, and selected services businesses. Northern Trust’s teams evaluate industry dynamics, seasonal patterns, and supply chain considerations when structuring each facility to ensure practical, sustainable financing.

Client Experience and Service Model

Clients benefit from a collaborative approach that pairs senior relationship bankers with experienced credit officers, field examiners, and operations specialists. The onboarding process emphasizes quick assessment and tailored documentation. After closing, borrowers receive hands-on support for collateral administration, reporting automation, and treasury integration. Proactive communication and periodic strategy reviews ensure the facility continues to align with evolving business needs.

Technology and Integration

Northern Trust integrates modern treasury and reporting technologies to streamline borrowing base submissions, collateral reporting, and cash management. Secure portals and electronic statement submission reduce administrative burden and accelerate availability calculations. Where appropriate, systems integration with clients’ ERP or order-to-cash platforms automates receivables monitoring and enhances data accuracy.

Benefits for Borrowers

• Improved liquidity: Convert working capital assets into accessible funding to support growth and operational needs.
• Cost-effective capital: Asset-backed pricing can be more efficient than unsecured alternatives for companies with substantial tangible assets.
• Scalable financing: Borrowing capacity can expand with business growth, supporting seasonal peaks and strategic initiatives.
• Capital structure flexibility: ABL can complement term debt or equity solutions, enabling optimized balance sheet management.
• Operational alignment: Structures and covenants are designed to minimize disruption to day-to-day business while protecting lender interests.

Underwriting Philosophy

Underwriting centers on asset quality, cash flow sustainability, and collateral realizability. Northern Trust evaluates receivable concentration, customer creditworthiness, inventory obsolescence risk, and equipment resale markets. The credit decision process balances empirical valuation methodologies with sector knowledge, producing financing that is both prudent and practical.

Structure and Documentation

Documentation is tailored to reflect the agreed collateral package, control mechanics, and borrower operations. Common elements include security agreements, borrowing base schedules, intercreditor arrangements where applicable, and agreed reporting formats. The objective is to create clear, enforceable documentation that supports efficient administration and reduces ambiguity in stress scenarios.

Why Choose This ABL Solution

Northern Trust’s ABL offering combines institutional strength, specialized credit expertise, and operational excellence. The program is built for clients who require reliable, asset-driven liquidity and seek a partner that understands the interplay between collateral administration and corporate finance strategy. Through disciplined underwriting, proactive monitoring, and client-focused service, this solution aims to deliver predictable access to capital while preserving business agility.

Getting Started

The initial evaluation begins with a concise description of the asset base, recent financials, and a summary of operational characteristics. From there, Northern Trust’s team conducts a thorough collateral analysis, proposes structure alternatives, and outlines documentation and operational requirements. The goal is to move efficiently from proposal to funding while ensuring the facility reflects the client’s objectives and risk profile.

Asset-based Lending at Northern Trust is a pragmatic financing solution for businesses seeking capital that mirrors their tangible asset strength, backed by a disciplined approach to credit, monitoring, and client service.

Address Bank: Chicago, Illinois, U.S.
Bank: Northern Trust
Headquarters: Chicago
Products: Loans & Credit
Type: Asset-Based Lending