Asset-Based Lending KeyCorp in USA
Asset-Based Lending
Asset-Based Lending (ABL) is a flexible financing solution that uses a company’s tangible assets as collateral to secure working capital, growth funding, or turnaround financing. Unlike traditional cash-flow loans that rely primarily on historical earnings and credit metrics, ABL focuses on the value and liquidity of assets — such as accounts receivable, inventory, equipment and real estate — enabling businesses to unlock capital tied up in day-to-day operations.
Why choose Asset-Based Lending?
- Faster access to capital: Advances are based on a borrowing base (eligible receivables, inventory or equipment), allowing qualified borrowers to obtain funding more quickly than many unsecured or cash-flow loans.
- Flexible use of proceeds: Funds can be deployed for working capital, seasonal needs, inventory build, capital expenditures, acquisitions or debt refinancing.
- Higher advance rates: Advance percentages on eligible assets can provide greater liquidity for businesses with strong collateral but limited earnings history or uneven cash flow.
- Covenant relief and structure options: ABL facilities often provide covenant flexibility compared to traditional bank loans and can be structured as revolvers, term loans or combo facilities.
- Scalable financing: Borrowing capacity typically grows with the business — as receivables and inventory increase, available credit can increase, supporting rapid growth.
Common collateral types
- Accounts receivable: Domestic or approved international invoices are most commonly used as the basis for advances.
- Inventory: Finished goods, raw materials, and work-in-process (subject to eligibility and advance rates).
- Equipment and machinery: Commercial equipment, production assets and vehicles evaluated for lien and liquidation value.
- Commercial real estate: Owner-occupied properties or income-producing real estate can secure larger, long-term facilities.
- Purchase order financing: Financing against confirmed purchase orders for manufacturers and distributors to fulfill large contracts.
Who benefits from ABL?
ABL is well-suited to middle-market companies and SMEs across industries where tangible assets represent substantial value. Typical candidates include:
- Manufacturers and distributors
- Wholesale and retail businesses
- Transportation and logistics providers
- Construction and contracting firms
- Seasonal businesses and companies undergoing restructuring or rapid growth
How the process works
- Assessment: Lender reviews asset mix, eligibility, historical collections and controls.
- Valuation and advance rates: A borrowing base is established with advance rates applied to each asset class (for example, 70-90% on eligible receivables, lower on inventory/equipment).
- Documentation and closing: Security agreements, UCC filings, and reporting covenants are executed.
- Ongoing monitoring: Periodic reporting, field examinations and borrowing base reconciliations ensure compliance and adjust credit availability.
- Availability and repayment: Funds are drawn as needed within the facility, with repayments tied to collections or asset sales.
Key terms to know
- Borrowing base: The aggregate value of eligible collateral used to calculate available credit.
- Advance rate: Percentage of collateral value a lender will advance.
- Reserve: Portion of the borrowing base held back to cover potential losses or over-advances.
- Field exam: On-site verification of inventory and equipment and review of controls.
- Eligibility criteria: Rules that determine what assets qualify and how they are valued.
Advantages and considerations
Asset-Based Lending provides reliable liquidity and scalability for asset-rich businesses, often with faster approvals and more flexible covenants than pure cash-flow lending. However, it requires strong asset controls, regular reporting and acceptance of lender rights over collateral. Costs and advance rates vary with asset quality, industry, and borrower risk profile.
Find the right ABL solution
Whether you need short-term working capital, financing for growth, or a bridge during transition, an asset-based lending facility can be tailored to your business needs. Browse our lender profiles to compare structures and terms, or contact an advisor to evaluate eligibility and design a borrowing base facility that matches your cash flow and asset profile.
