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Every business needs steady capital, but not all have the time to wait for lengthy loan approvals. With asset-based lending (ABL), you can unlock working capital by borrowing against the value of your receivables, inventory, equipment, or real estate.
What Is Asset Based Lending (ABL)?
Unlike traditional loans that rely heavily on credit history, ABL is secured by the assets your business already owns. That makes ABL funding a flexible option for established companies that may experience seasonal swings or inconsistent cash flow.
The U.S. asset-based lending market is valued at over $500 billion, proving it’s a trusted, mainstream solution for companies that want reliable capital to manage payroll, fund growth, and seize new opportunities.
Contact Business Factors & Finance today to find the right asset based lending solution. With ABL, you access funds without giving up equity or waiting months for approvals, so you can move your business forward on your terms.
How Asset-Based Lending Works
Get the Funds You Need, When You Need Them
Starting with Business Factors is quick and seamless. Asset-based lending transforms your existing assets into reliable working capital that fuels payroll, operations, and growth.
Here's how it works:
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Evaluate Assets
Your lender reviews your accounts receivable, inventory, equipment, or property to determine borrowing capacity.
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Establish a Credit Line
Based on asset value, the lender provides a revolving credit line or term loan, often advancing 70%–90% of receivables and 50%–70% of inventory.
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Draw Funds as Needed
Use your available line of credit to cover expenses, seize growth opportunities, or stabilize cash flow.
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Repay and Re-borrow
As customers pay invoices or assets are replenished, funds become available again, creating a continuous cycle of accessible capital.
Costs and Fees
Understanding the Price of Asset-Based Lending
Asset based loan financing is generally more affordable than unsecured financing, but costs vary depending on your assets, industry, and lender terms. Most lenders and asset based lending companies charge an interest rate plus administrative fees for monitoring, collateral reviews, or legal work.
Knowing exactly how these fees are structured helps you anticipate your total expense and manage cash flow effectively.
How Asset-Based Lending Fees Are Structured
When evaluating the cost of asset-based lending, it’s important to understand that fee structures can vary depending on the lender and the specifics of your loan. While interest rates are a primary cost, lenders may apply additional fees tied to how your loan is monitored and managed.
Two common approaches include:
- Interest-Based Model: Rates are applied to your outstanding balance, similar to a traditional loan.
- Fee-Based Model: Additional charges may apply for services like audits, appraisals, or lockbox management.
Both models are transparent when you work with the right lender, but it’s important to clarify the details upfront.
Here’s a look at how different fee structures can affect the total cost of your asset-based loan.
EXAMPLE 1: Borrowing Against Receivables
A company has $500,000 in eligible accounts receivable. With an 85% advance rate, the borrowing base is $425,000.
Credit line: $425,000 Interest: 12% annually Fees: 1% commitment + 0.5% monitoringIf the company draws $200,000, they pay interest only on that balance. As invoices are collected, the available borrowing base grows again.
EXAMPLE 2: Borrowing Against Receivables and Inventory
A manufacturer has $200,000 in receivables (85% = $170,000) and $150,000 in inventory (50% = $75,000, capped at $50,000).
Borrowing base = $220,000 Credit Limit: $250,000 Interest Rate: 12.5% annuallyThe company borrows $150,000 to buy raw materials. As receivables are collected, the borrowing base refreshes, giving them ongoing access to working capital.
Hidden Fees and How to Avoid Them
As you compare asset-based lending proposals, it’s important to look beyond the headline interest rate. Many agreements include additional costs that may not be obvious upfront, but can significantly increase your overall borrowing expense.
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Collateral Monitoring and Audit Fees
Lenders often require regular audits, field exams, or appraisals of your collateral (such as receivables, inventory, or equipment). These costs can add up quickly, especially if audits are frequent.
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Unused Line Fees
Some lenders charge a fee if you don’t borrow up to a certain percentage of your credit line each month. While the fee may seem small, it can become expensive if your borrowing needs fluctuate.
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Administrative and Transaction Fees
Additional costs, such as processing fees, lockbox services, wire transfers, or legal documentation, can increase your total credit cost.
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Long-Term Contracts or Early Termination Penalties
Certain agreements lock you into multi-year terms. Exiting early can trigger steep penalties, so it’s important to review contract terms carefully.
Practical Tips to Avoid Hidden Fees
To keep borrowing costs under control and maximize the value of your asset-based loan, consider these strategies:
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Clarify All Fees Upfront
Ask for a comprehensive breakdown of every potential fee, including collateral monitoring, unused line fees, audit costs, and legal or administrative charges.
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Work With a Transparent Lender
Choose a lender with a reputation for clear pricing, fair practices, and strong client reviews. A trustworthy partner reduces the risk of unexpected expenses.
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Track Loan Usage and Collateral Reporting
Stay on top of how much of your credit line you’re drawing and how your collateral is being monitored. Careful tracking helps you avoid unused line fees, surprise audit charges, or disputes over collateral values.
Why Your Business Needs Asset-Based Lending
Put Your Assets to Work for Immediate Growth
If your business has valuable receivables, inventory, or equipment but faces cash flow gaps, asset-based lending provides the capital to meet payroll, purchase materials, and cover expenses, without waiting on client payments.
ABL isn’t a last resort. It’s a flexible financing strategy that grows with you. As your assets increase, your borrowing base expands, giving you more working capital to reinvest in growth and seize opportunities.
Don’t let untapped assets sit idle. Unlock their value through asset-based lending and keep your business moving forward.
Industries That Benefit From Asset-Based Lending
Solving Cash Flow Challenges Across Multiple Sectors
Here’s how asset-based lending solutions help businesses across these industries overcome cash flow challenges and remain financially stable.
Freight Bill & Trucking Factoring
Staffing, Labor & Payroll Factoring
Manufacturing Financing
Agriculture & Food Production Factoring
Technology & IT Financing
Oil & Gas Financing
Which Model Fits Your Business Needs?
When it comes to asset based lending vs factoring, both provide fast access to working capital. However, they differ in flexibility, risk, and how they use your assets to secure funding.
Factoring
Asset-Based Lending (ABL)
Factoring allows businesses to sell their outstanding invoices to a factoring company in exchange for immediate cash. This financing option is based on the creditworthiness of your customers rather than your company’s overall financial strength.
Benefits of Factoring
Some key advantages of factoring include:
- Fast access to cash without waiting for customers to pay.
- Approval is primarily based on customer credit, not your business’s balance sheet.
- Collections and credit monitoring are often handled by the factoring company, saving your team time.
- Useful for businesses with slow-paying but creditworthy customers.
Common Risks Associated With Factoring
Despite its advantages, factoring also comes with challenges:
- Factoring fees may be higher compared to traditional financing.
- Your customers are aware of the factoring arrangement, which may affect relationships.
- Reliance on customer credit quality means invoices from weaker clients may not qualify.
- Frequent use may lead to dependency on factoring for cash flow.
Asset-based lending is a revolving line of credit secured by your company’s assets, such as accounts receivable, inventory, or equipment. Instead of selling invoices, your business borrows against the value of these assets.
Benefits of Asset-Based Lending
Some key advantages of ABL include:
- Provides flexible, ongoing access to capital as your assets grow.
- Typically offers lower financing costs than factoring.
- Keep customer relationships private since collections remain under your control.
- Allows borrowing against a wide range of assets, not just invoices.
Common Risks Associated With Asset-Based Lending
While ABL offers flexibility, it’s not without challenges:
- Requires strong internal financial reporting and frequent collateral audits.
- Approval may be stricter, focusing on your company’s financial stability and asset quality.
- Borrowing base may fluctuate depending on the value of your receivables, inventory, or other pledged assets.
- Failure to maintain collateral value can limit available credit or trigger repayment.
Turn What You Own Into Working Capital
Traditional financing can be slow and restrictive. Asset based lending companies like Business Factors & Finance unlock the value in your assets, giving you fast, flexible ABL funding without the usual roadblocks.
Reach out today to work with a team that knows how to turn your assets into opportunity.
FAQs
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Is asset-based lending a loan?
Yes. Asset-based lending is a type of secured loan that allows your business to borrow against valuable assets like accounts receivable, inventory, or equipment. Instead of relying only on credit history, lenders use your assets as collateral.
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What happens if my business can’t repay the loan?
Since ABL is secured, the lender may take possession of the pledged assets (such as receivables or inventory) to recover the balance. However, lenders work closely with businesses to structure repayment so that disruptions are minimized.
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Will using ABL make my business look financially unstable?
Not at all. Many healthy, growing companies use asset based lending to access working capital quickly, especially when traditional loans are harder to secure. It’s viewed as a smart financing tool, not a red flag.