Asset-based Lending at UBS

Asset-based lending (ABL) at UBS is a financing solution designed to unlock working capital and support growth by using a company’s tangible and near‑cash assets as collateral. This product is tailored for established middle market and corporate clients who require flexible funding structures tied to the value and performance of receivables, inventory, equipment and other eligible assets. UBS combines global banking capabilities with sector expertise to deliver financing that aligns liquidity to operating cycles while preserving borrowing capacity.

Core Features

• Flexible collateral base: Financing secured by accounts receivable, inventory, machinery and equipment, letters of credit, and in some cases, intellectual property or real estate.
• Borrowing base mechanics: Periodic valuation of eligible assets establishes a borrowing base that dynamically determines available credit.
• Revolving and term tranches: Revolving lines for ongoing working capital plus term loans or capex RCFs for specific investments.
• Structural flexibility: Covenants and reporting tailored to industry cycles and client needs, with options for springing covenants and bespoke reporting regimes.
• Global servicing: Cross-border capabilities, multicurrency facilities and coordinated global collateral management for multinational clients.

Benefits

• Maximize liquidity: Convert underutilized assets into funding to support operations, payroll, inventory build, or strategic initiatives.
• Cost efficiency: Pricing reflects the risk profile of secured assets and borrower credit; ABL can be more economical than unsecured alternatives for asset-rich companies.
• Growth enablement: Financing that scales with receivables and inventory, offering capacity as business expands seasonally or through acquisition.
• Balance sheet management: Preserve covenant headroom on other facilities by segregating asset-backed borrowings, and potentially improve leverage metrics.
• Operational alignment: UBS integrates cash management, treasury, and advisory services to optimize working capital and supply chain efficiency.

How It Works

UBS evaluates eligible assets and establishes advance rates—percentages of asset value that determine lending capacity. For example, trade receivables may be advanced at a high percentage, while inventory and fixed assets carry more conservative advance rates. The borrowing base is calculated at regular intervals (weekly, biweekly, or monthly) based on verified aging reports, inventory counts or third‑party appraisals. Drawings under the facility are available up to the borrowing base less any reserves, and interest accrues on the outstanding balance according to the agreed margin and reference rate.

Eligibility and Typical Clients

UBS serves a broad range of industries with ABL solutions, including manufacturing, wholesale and distribution, consumer products, healthcare and specialty industries. Typical clients include:

• Companies with substantial trade receivables and inventory relative to EBITDA;
• Organizations undergoing rapid growth, seasonal peaks or working capital stress;
• Private equity sponsors seeking acquisition and post‑closing financing;
• Businesses requiring financing for turnaround, restructuring, or capital expenditure programs.

Documentation and Covenants

Documentation reflects the secured nature of ABL and commonly includes a security agreement, one or more guarantees (if applicable), a borrowing base certificate, and customary representations and warranties. Covenants are typically performance‑based, focused on borrowing base compliance, minimum liquidity thresholds, and reporting obligations rather than fixed leverage targets. UBS works to balance creditor protection with operational flexibility.

Risk Management and Monitoring

Active asset monitoring is central to ABL. UBS employs regular reporting requirements, periodic collateral audits and valuation reviews. For trade receivables, eligibility criteria may exclude concentrations, aged balances or related‑party receivables. Inventory eligibility is assessed by type, location, obsolescence and turnover. Equipment and real estate collateral are appraised and insured. UBS also utilizes covenants and reserve mechanisms to mitigate exposure to seasonal swings or concentration risk.

Pricing and Fee Structure

Pricing depends on borrower credit quality, collateral composition, facility size, and market conditions. Components typically include a margin over a reference rate, commitment fees on unused capacity, and customary arrangement and monitoring fees. Structure can be negotiated to include stepped pricing, accordion features, and pricing floors as needed to reflect deal complexity and risk profile.

Use Cases

• Working capital optimization: Smooth cash flow variability caused by seasonality or invoice terms.
• Acquisition financing: Bridge financing or working capital support for add‑on acquisitions.
• Supply chain financing: Support higher inventory levels or supplier terms without diluting capital.
• Restructuring and turnaround: Provide liquidity while operational improvements take hold.

Implementation Process

1. Initial assessment: Confidential review of financials, asset schedules and operational dynamics.
2. Structure design: Customize advance rates, covenants, and reporting aligned with business cycles.
3. Due diligence: Collateral review, legal documentation and financial modeling.
4. Facility activation: Set up reporting protocols, treasury links and drawdown mechanics.
5. Ongoing servicing: Regular collateral monitoring, periodic audits and relationship management.

Why Choose UBS for Asset-Based Lending

UBS combines international banking capabilities, in-depth industry insight and an approach that aligns financing to commercial realities. The bank’s global network supports cross-border collateral structures and foreign currency needs, while dedicated teams deliver integrated solutions spanning lending, treasury and advisory services. UBS focuses on pragmatic documentation and active portfolio management to help clients maintain liquidity and pursue strategic objectives.

Frequently Asked Questions

• What types of assets qualify? Eligible assets commonly include trade receivables, inventories, equipment and, in some transactions, real estate or intellectual property subject to valuation and insurability.
• How often is the borrowing base calculated? Frequency varies by facility—weekly or monthly calculations are common, depending on the client’s operating cycle.
• Can ABL be combined with other financing? Yes. ABL can sit alongside term loans, acquisition facilities and capital markets financing, structured with appropriate intercreditor protections when necessary.

For businesses seeking a resilient, asset-focused financing solution, UBS’s asset-based lending capabilities provide tailored liquidity, disciplined risk management and a platform to support growth and operational stability.