Asset-Based Lending at WaFd Bank

Asset-based lending (ABL) at WaFd Bank is a flexible financing solution designed to help businesses convert working capital assets into access to credit. Structured around the value of a borrower’s tangible assets rather than relying solely on cash flow metrics, this product enables companies to finance growth, manage seasonal fluctuations, support acquisitions, and address short-term liquidity needs with a secured line of credit that responds to the realities of their balance sheet.

Core Features

• Collateral-focused lending: Loans secured by eligible assets such as accounts receivable, inventory, machinery and equipment, and in some cases real estate.
• Revolving credit facility: A revolving line of credit provides ongoing access to capital up to an advance rate that fluctuates with collateral levels.
• Advance rates and borrowing base: Borrowing availability is typically determined by a borrowing base formula that applies advance rates to qualified collateral categories.
• Flexible structures: Facilities can include letters of credit sublimits, term loan components, and seasonal or swinglines tailored to business cycles.
• Integrated monitoring: Regular reporting, periodic collateral verification, and third-party appraisals where appropriate to maintain accurate collateral valuations.

Who Benefits

ABL is particularly well-suited to middle-market companies, distributors, manufacturers, and wholesalers with capital tied up in receivables, inventory, and equipment. Businesses undergoing rapid growth, those with seasonal revenue patterns, companies pursuing acquisitions, and organizations in need of turnaround financing will find ABL advantageous because it aligns borrowing capacity with tangible asset levels.

Typical Collateral Types

• Accounts receivable: Often the primary collateral; both domestic and approved foreign receivables may be included subject to eligibility criteria.
• Inventory: Finished goods, work-in-process, and eligible raw materials depending on industry and valuation methods.
• Equipment and machinery: Eligible tangible assets with identifiable value and marketability.
• Real estate: In select cases, owner-occupied or investment real estate can supplement borrowing capacity.

How It Works

The availability of credit under an ABL facility is determined by calculating a borrowing base. The borrowing base multiplies advance rates by the value of eligible collateral categories and then subtracts reserves and ineligible items. For example, accounts receivable may be advanced at a higher percentage than inventory, reflecting ease of liquidation. As a business invoices customers and sells inventory, the borrowing base and available credit adjust accordingly, offering dynamic liquidity tied to operational performance.

Underwriting and Documentation

Underwriting for asset-based loans focuses on collateral quality, concentration, and collectability, in addition to management experience and overall financial condition. Typical requirements include detailed accounts receivable reports, aged inventory listings, equipment schedules, and historical financial statements. Legal documentation establishes security interests in collateral, outlines reporting obligations, and defines covenants and events of default. WaFd Bank works with borrowers to design documentation that balances protection for the bank with operational flexibility for the company.

Pricing and Fees

Pricing for ABL reflects the secured nature of the facility and the operational effort required to monitor collateral. Interest rates may be structured as a spread over a reference rate, with pricing tiers tied to utilization or covenant levels. Fees can include origination fees, commitment fees on unused portions, collateral monitoring fees, and expenses for third-party appraisals or field examinations. WaFd Bank aims to provide transparent fee structures and competitive terms aligned with each client’s risk profile and business needs.

Advantages Compared to Traditional Financing

• Higher borrowing capacity: Companies with significant tangible assets often obtain more credit than through unsecured or strictly cash-flow-based loans.
• Growth-friendly: As eligible assets grow, borrowing capacity can increase without needing frequent renegotiation.
• Seasonal support: Facilities can be structured to absorb seasonal swings in working capital requirements.
• Customizable solutions: ABL supports a variety of structures and can incorporate letters of credit, term debt, and M&A financing.

Operational Support and Relationship Management

WaFd Bank emphasizes close relationship management and operational support throughout the life of an ABL facility. Clients benefit from frequent communication with experienced bankers, assistance in setting up reporting systems, and guidance on inventory and receivables management practices that enhance collateral quality. Periodic in-person or remote reviews, tailored reporting templates, and collaborative problem solving are all part of the bank’s approach to maintaining a productive lender-borrower relationship.

Use Cases

• Financing rapid growth where working capital must scale with sales.
• Supporting seasonal businesses through peak inventory and receivable cycles.
• Providing bridge financing for acquisitions or business transitions.
• Enabling turnarounds where access to secured liquidity supports restructuring efforts.

Risk Management and Compliance

Effective risk management is central to asset-based lending. Collateral verification, concentration limits, invoice-level credit checks, and periodic field examinations all mitigate borrower and collateral risk. Documentation typically includes covenants requiring delivery of timely financial statements and borrowing base certificates. WaFd Bank maintains rigorous compliance procedures and monitoring practices to ensure the ongoing integrity and enforceability of security interests.

Getting Started

Engagement typically begins with an initial assessment to understand the business model, asset composition, and working capital needs. A preliminary borrowing base analysis illustrates potential capacity, followed by due diligence and formal underwriting. Throughout the onboarding and closing process, WaFd Bank’s team aims to minimize operational disruption and provide clear guidance on reporting and collateral controls required to activate and manage the facility.

Conclusion

Asset-based lending at WaFd Bank is a practical, scalable solution for companies that need to unlock the value of their tangible assets. By aligning credit availability with the borrower’s balance sheet, ABL offers a responsive financing tool that supports growth, improves liquidity flexibility, and adapts to operational realities. With experienced underwriting, transparent terms, and ongoing relationship support, this product is tailored to help asset-rich businesses achieve short- and long-term objectives while maintaining disciplined risk management.