Asset-based Lending at Old National Bank

Old National Bank’s asset-based lending (ABL) solution is designed to unlock working capital and growth potential for middle-market companies by using balance-sheet assets as primary collateral. This financing option is ideal for businesses that require flexible capital to manage seasonality, finance inventory build, support rapid growth, refinance existing debt, execute acquisitions, or navigate turnaround situations. By focusing on tangible, cyclical, and liquid assets—such as accounts receivable, inventory, equipment, and select real estate—ABL provides a reliable and scalable credit facility that adapts to the ebb and flow of business activity.

Who benefits from ABL?

Asset-based lending is particularly well suited for:

• Distributors and wholesalers with large inventory and recurring receivables.
• Manufacturers needing funds for raw materials or expanded production runs.
• Retailers facing seasonal peaks and troughs in inventory investment.
• Service or contracting firms with significant equipment investments.
• Companies in transition—growth, restructuring, or preparing for a sale—seeking a predictable source of capital.

Key advantages

• Improved liquidity: Convert eligible assets into immediate cash to meet payroll, vendor obligations, and operational needs.
• Flexible borrowing base: Credit availability grows and contracts with the size of your collateral pool, aligning financing with your working capital cycle.
• Scalability: Facilities can be structured to support growth initiatives, acquisitions, or temporary capital demands.
• Custom structuring: ABL arrangements are tailored to your industry, asset mix, and cash flow profile, with covenant packages designed to balance oversight and operational freedom.
• Competitive cost of capital: For businesses with strong collateral, ABL can be more efficient than unsecured alternatives and offers an attractive blend of pricing and availability.
• Experienced partners: Access to a dedicated relationship team and credit specialists who understand the operational nuances of collateral-based lending.

How the facility works

At its core, an ABL facility calculates a borrowing base based on the value and quality of eligible assets. Typical components include:

• Accounts receivable: Advances are made against billed receivables, often net of concentrations and ineligible receivables.
• Inventory: Advances are based on the realizable value of finished goods, work-in-process, and raw materials, adjusted for obsolescence.
• Equipment and machinery: Financing can be secured by appraised value of key capital assets.
• Real estate: In certain structures, owner-occupied or income-producing property may be included to supplement availability.

Advance rates vary by asset type and quality. The total available credit equals the formula-driven borrowing base less reserves, fees, and any outstanding balances. Regular reporting and periodic audits are integral to maintaining transparency and protecting both the borrower and lender.

Typical transaction structure

While every relationship is bespoke, common elements include:

• Revolving credit facility tied to a borrowing base.
• Letter-of-credit capability to support trade and surety needs.
• Term debt for capital expenditures, acquisitions, or refinancing.
• Cash management arrangements and lockbox options for improved collections processing.
• Field examinations, periodic collateral audits, and A/R verification to validate asset quality.

Documentation and eligibility considerations

Successful ABL candidates typically present a clear record of receivables and inventory, consistent financial reporting, and operating systems that support collateral monitoring. Key documentation generally includes:

• Audited or reviewed financial statements and interim financials.
• Accounts receivable aging schedules and back-up invoices.
• Detailed inventory listings and periodic cycle counts.
• Fixed asset schedules and, where applicable, equipment appraisals.
• Tax returns and corporate organizational documents.
• A business plan or use-of-proceeds summary for new or expanded facilities.

Credit underwriting emphasizes collateral quality and availability, as well as management’s ability to sustain the business through varying cycles. A robust internal control environment, accurate reporting, and a willingness to cooperate with monitoring procedures enhance eligibility and may lead to more favorable terms.

Operational partnership

Old National Bank approaches ABL as a collaborative financing solution. Relationship managers and credit specialists work with company leadership to design a structure that supports strategic goals while managing risk. The bank’s teams help streamline onboarding, set up reporting protocols, and conduct ongoing reviews to ensure the facility remains aligned with business needs. This partnership mindset extends to problem-solving scenarios—whether addressing temporary liquidity gaps, funding growth, or facilitating a refinance or sale.

Use cases and examples

Common scenarios where ABL delivers measurable impact include:

• Seasonal retailers using inventory-backed lines to stock up before peak periods.
• Manufacturers financing raw materials ahead of large production runs tied to multi-month contracts.
• Distributors flattening cash conversion cycles by borrowing against receivables to finance purchases.
• Companies undergoing turnaround that need immediate liquidity while restructuring operations.

Considerations and risk management

While ABL provides flexibility, it also requires disciplined reporting and ongoing asset management. Common considerations include monitoring requirements, potential concentration issues in receivables, inventory obsolescence, and valuation adjustments. Early and transparent communication between borrower and lender helps anticipate issues and maintain a constructive relationship.

Conclusion

Asset-based lending at Old National Bank is a practical, scalable financing alternative for businesses that can leverage tangible assets to support working capital and strategic initiatives. By coupling collateral-focused underwriting with a responsive service model, the bank aims to provide predictable liquidity, flexible structures, and a partnership-oriented approach that helps companies navigate growth and change with confidence.

Address Bank: Chicago, Illinois Evansville, Indiana, U.S.
Bank: Old National Bank
Headquarters: Evansville, Indiana
Products: Loans & Credit
Type: Asset-Based Lending