What is Asset-based Lending?

Asset-based lending is a form of commercial financing in which loans are secured primarily by tangible assets such as accounts receivable, inventory, equipment, and in some cases real estate. At Merchants Bank, our ABL solutions are structured to maximize borrowing capacity, preserve operational autonomy, and provide predictable liquidity under a covenant framework that aligns with your business realities.

Key Features of Merchants Bank ABL

• Flexible collateral options: Borrow against receivables, inventory, machinery, and eligible real estate to optimize capital availability.
• Customized advance rates: Advance rates are calibrated to asset quality — allowing for higher advances on prime receivables and conservative rates on slower-moving inventory.
• Revolving credit availability: Access a revolving line of credit that grows and contracts with your working capital needs.
• Competitive pricing: Transparent fee structures and competitive interest terms that reflect the risk profile and relationship depth.
• Responsive relationship management: Dedicated ABL specialists and credit officers who understand industry dynamics and operational nuances.
• Integration with treasury services: Seamless treasury and cash-management capabilities to optimize collections, payments, and reporting.

Benefits for Your Business

Choosing Merchants Bank for asset-based lending delivers tangible benefits that support growth and stability:

• Enhanced liquidity: Convert underutilized assets into working capital to fund growth, manage seasonality, or bridge cash flow gaps.
• Scalable financing: Lines typically adjust with asset performance, allowing borrowing capacity to expand as the company grows.
• Preserve ownership: ABL is often preferred to equity financing for owners who wish to retain control while accessing capital.
• Predictable covenants: Covenant structures are designed to be understandable and manageable, aligning metrics with business operations.
• Fast access under stress: In turnaround or restructure scenarios, asset-backed facilities can offer immediate liquidity where unsecured options are limited.

Who Is an Ideal Candidate?

Merchants Bank specializes in serving middle-market companies across manufacturing, distribution, retail, wholesale, and service sectors. The ideal candidate typically has:

• Substantial accounts receivable and/or inventory on the balance sheet
• Predictable sales cycles and identifiable customer concentrations
• Sound operational systems and financial controls
• A clear plan for the use of proceeds — growth, working capital, acquisition financing, or restructuring

How the Process Works

1. Initial consultation: A Merchants Bank ABL specialist evaluates your business, asset composition, and financing objectives.
2. Asset evaluation: We assess the quality and value of receivables, inventory turnover, equipment appraisals, and any real estate considerations.
3. Structure proposal: A term sheet outlines advance rates, facility size, covenants, reporting requirements, and fees.
4. Documentation and closing: Legal documents, security agreements, and control arrangements are finalized, and cash management flows are established.
5. Ongoing partnership: Regular reporting, collateral monitoring, and proactive communication ensure the facility remains aligned with business performance.

Documentation and Requirements

To expedite approval, prepare documentation that demonstrates asset quality and business performance:

• Recent financial statements and interim management reports
• Accounts receivable aging schedules and customer concentration details
• Inventory listings, valuation methods, and turnover data
• Equipment lists with serial numbers and maintenance records
• Business plan or use-of-proceeds memo for new financing

Merchants Bank works with clients to identify missing pieces, and our team can coordinate appraisals and third-party validations when necessary.

Typical Terms and Considerations

While terms vary by client, key considerations include:

• Advance rates: Determined by asset class — higher for eligible receivables, lower for inventory and equipment.
• Facility size: Based on collateral value after eligibility adjustments and reserves.
• Interest and fees: Competitive pricing with customary monitoring and issuance fees where applicable.
• Covenants and reporting: Periodic financial covenants and collateral reports to ensure transparency.
• UCC and perfection: Standard security filings and control agreements to protect the lender’s interest.

Use Cases and Examples

Businesses leverage Merchants Bank ABL for a variety of strategic needs:

• Working capital for growth: Finance inventory purchases and accounts receivable to support sales expansion.
• Seasonal peaks: Bridge cash flow fluctuations during peak inventory buildup and post-season collections.
• Mergers and acquisitions: Supplement acquisition financing with asset-backed capacity to close deals efficiently.
• Turnaround financing: Provide immediate liquidity to stabilize operations while executing a recovery plan.

Managing Risk with Confidence

Merchants Bank emphasizes transparent underwriting and collaborative risk management. Routine collateral audits, clear reporting workflows, and proactive relationship management reduce surprises and help businesses confidently navigate growth or operational change.

Why Choose Merchants Bank?

Our combination of industry expertise, customized structuring, and hands-on service makes Merchants Bank a strategic partner for companies seeking asset-based financing. We focus on understanding the unique drivers of your business and delivering practical financing solutions that support both near-term liquidity and long-term objectives.