Asset-based Lending at Texas Capital Bank

Texas Capital Bank’s Asset-based Lending (ABL) solution provides flexible financing secured by a company’s working capital and tangible assets. Designed for middle-market businesses seeking reliable liquidity, ABL combines predictable borrowing capacity with customized underwriting to support growth, seasonal cycles, acquisitions, recapitalizations, and turnaround situations. This product is ideal for companies that have valuable receivables, inventory, machinery, or real estate but may not meet the narrow debt-service metrics required by traditional cash-flow loans.

How Asset-based Lending Works

Asset-based lending establishes a secured credit facility where the borrowing base is tied to the value of eligible collateral. Common collateral categories include accounts receivable, inventory, machinery and equipment, and owner-occupied or investment real estate. Borrowing capacity is determined through appraisals, availability calculations, and concentration limits. Borrowers draw funds as needed up to a committed line, repaying and redrawing based on changes in the borrowing base. Regular reporting, collateral monitoring, and periodic audits protect both lender and borrower by ensuring the facility accurately reflects the company’s asset position.

Key Features and Benefits

• Flexible Liquidity: Access revolving capital tied to tangible assets to support working capital needs and seasonal demand.
• Growth and Transaction Support: Finance organic growth initiatives, acquisitions, and strategic investments with a facility that scales as collateral grows.
• Customized Structures: Facilities can be structured as revolving lines, term tranches, or a combination tailored to cash flow and asset profiles.
• Speed and Predictability: Proven processes and experienced teams enable efficient underwriting and timely funding decisions.
• Expertise in Complex Situations: Practical solutions for companies undergoing turnaround, restructuring, or post-acquisition integration.
• Integrated Banking Services: Optional treasury, deposit, and payment services provide operational efficiency and clearer cash reporting.

Types of Collateral Typically Accepted

• Accounts Receivable: Trade receivables, often subject to aging and concentration limits; eligibility may exclude affiliated receivables or disputed balances.
• Inventory: Finished goods, raw materials, and work-in-process with considerations for valuation method and marketability.
• Equipment and Machinery: Commercial equipment used in operations, valued through appraisals and inspection.
• Real Estate: Owner-occupied or investment properties may be included, subject to appraisal and lien position.
• Other Tangible Assets: Select intangibles, fixtures, and leasehold improvements can be evaluated on a case-by-case basis.

Loan Structures and Terms

Asset-based credit facilities can be designed to meet specific business needs. Common structures include:

• Revolving Credit Lines: Continuous access to capital up to a borrowing base to manage day-to-day operations and seasonal swings.
• Term Loans: Secured term financing for capital expenditures, acquisitions, or structured paydowns aligned with project cash flow.
• Delayed Draw Facilities: Forward-funded commitments that allow borrowers to access funds as pre-defined milestones are met.
• Acquisition and Bridge Financing: Interim financing that supports strategic transactions until a permanent capital structure is implemented.

Underwriting and Credit Considerations

Underwriting focuses on asset quality, collateral convertibility, and the predictability of cash conversion cycles. Key elements include:

• Detailed review of receivable aging, customer concentration, and collections history.
• Inventory valuation methodologies, turnover rates, obsolescence risks, and storage conditions.
• Equipment appraisals, maintenance records, and resale values.
• Management experience, financial reporting quality, and internal controls.
• Projected cash flows and scenarios to evaluate covenant flexibility and stress resilience.

Monitoring, Reporting and Administration

Effective administration maintains alignment between borrowing availability and the client’s asset base. Typical monitoring practices include:

• Regular submission of borrowing base certificates and supporting schedules.
• Periodic field examinations, inventory observations, and receivable audits.
• Automated reporting tools and integrated account structures for transparency and faster reconciliations.
• Advance notifications and remediation plans when borrowing base or covenant thresholds are approached.

Industries and Use Cases

Asset-based lending is applicable across a wide range of industries, particularly where tangible collateral is central to operations:

• Manufacturing and Distribution: Support seasonal inventory cycles, raw material purchases, and distribution scaling.
• Wholesale and Retail: Finance inventory buildup for peak selling seasons and expand purchasing power.
• Healthcare and Medical Suppliers: Fund receivables from institutions and capital investments in specialized equipment.
• Business Services and Staffing: Manage payroll financing and rapid growth in billable receivables.
• Energy and Industrial: Provide liquidity for project cycles, parts inventory, and equipment maintenance.

Why Choose Texas Capital Bank for ABL

Borrowers select Texas Capital Bank for its combination of local decision-making, industry knowledge, and a collaborative approach to structuring asset-backed facilities. The bank’s specialists work with management teams to design agreements that balance lender protections with operational flexibility, enabling businesses to pursue growth while maintaining prudent risk controls.

Getting Started

Beginning the ABL process typically involves an initial assessment of collateral eligibility and an information package review. From there, Texas Capital Bank partners with companies to develop a tailored proposal, conduct collateral valuation and due diligence, and implement reporting and operational workflows that support the client’s ongoing needs. The result is a secured, scalable financing solution aligned to business objectives and asset realities.

Asset-based lending at Texas Capital Bank provides pragmatic, collateral-driven financing that helps growing and transitionary businesses unlock working capital, manage risk, and execute strategic initiatives with confidence.

Address Bank: Dallas, Texas, U.S.
Bank: Texas Capital Bank
Headquarters: Dallas
Products: Loans & Credit
Type: Asset-Based Lending