What Is Asset-Based Lending (ABL)?

ABL is a type of commercial loan secured by a company’s assets—typically accounts receivable, inventory, equipment, real estate, or even intellectual property. If the borrower defaults, the lender can seize these assets to recoup losses.

How It Works: Lenders evaluate the collateral’s value via field examinations or appraisals and set an advance rate—i.e., what portion of that value can be loaned.
Unlike traditional bank loans that depend heavily on cash flow metrics like EBITDA, ABL prioritizes collateral value and liquidity.

Terrell Capital Referral – Value of Service

At Terrell Capital Referral, our role is to act as a trusted intermediary, ensuring that every financing opportunity is strategically matched, efficiently structured, and successfully executed. In asset-based lending, speed, accuracy, and credibility are critical — and that’s exactly what we provide.

Asset-Backed Finance (ABF)

A type of financing where loans or credit are secured by specific assets (collateral).
Can be anything with value: receivables, inventory, equipment, aircraft, real estate, etc.
Borrowers gain access to cheaper capital by pledging assets.

Asset-Backed Securities (ABS)

Tradable securities created by pooling loans or receivables (e.g., credit card debt, auto loans, student loans).
Investors purchase ABS to receive payments backed by the underlying assets.
Example: A lender originates $100M in auto loans → securitizes them into ABS → sells to investors.

Securitized Credit

The broader category of credit instruments backed by pooled financial assets.
Includes:
- ABS (non-mortgage consumer loans, etc.)
- MBS (RMBS/CMBS) – mortgage-backed securities
- CLOs – collateralized loan obligations (pools of leveraged loans)
Investors buy into these pools for yield, with credit risk tied to the borrowers.

Structured Finance

An advanced form of financing that uses complex structures (tranches, waterfalls, credit enhancements).
Goal: Spread risk across investors with different risk appetites.
Example: A securitization might create:
- Senior tranche (low risk, low return)
- Mezzanine tranche (medium risk/return)
- Equity tranche (high risk, high return)

Specialty Finance

Lending that focuses on non-traditional assets or markets outside standard banking.
Examples:
- Equipment leasing
- Factoring & receivables finance
- Litigation finance
- Subprime consumer lending
Specialty finance companies often originate assets that can later be securitized.

In summary:

Asset-backed finance = loan secured by assets.
Asset-backed securities = tradable products created from those loans.
Securitized credit = umbrella for all pooled-credit instruments.
Structured finance = engineering the deal with tranches/risk layers.
Specialty finance = niche lenders who often supply the assets for securitization.

e who increases your likelihood of approval, accelerates funding, and secures better terms than you could achieve independently.

Key Advantages of ABL

Faster Approval – Since approval relies on tangible collateral rather than cash flow predictions, processing can be quicker than traditional bank loans.
Revolving Line of Credit – Most ABL facilities are structured as revolving lines, letting companies borrow repeatedly as collateral value fluctuates.
Scalable Borrowing Capacity – As your collateral base grows, so does the potential borrowing limit.
Flexibility in Use – ABL funds can typically be used for any business purpose (within lender guidelines), not limited to a specific projects.
Accessible for High-Leverage or Turnaround Firms – Businesses with high debt-to-equity ratios or unstable cash flows may still secure funding through ABL, thanks to the collateral focus.
Lower Interest Rates – Due to reduced risk for lenders, ABL frequently offers more favorable interest rates than unsecured loans.

What It’s Used For

ABL is particularly valuable for:

Rapidly growing or highly leveraged businesses without stable cash flow or strong credit history.
Companies with cyclical/seasonal cash needs, allowing them to maintain operations when revenue dips.
M&A situations, especially acquisitions financed using the target’s assets as collateral.
Turnaround or recapitalization efforts, where fast liquidity is essential.

ABL vs. Factoring vs. Cash-Flow Loans

Financing Type	Collateral Required?	Structure	Collateral Remains Yours?
ABL	Yes — AR, inventory, equipment, real estate	Loan or revolving line	Yes, borrower retains ownership
Factoring	Yes — typically accounts receivable	Sale of receivables	No (receivables are sold)
Cash-Flow Lending	No	Loan based on cash flow estimates	N/A (no collateral)

Factoring involves selling receivables at a discount—you’re not borrowing, just advancing funds.
Cash-Flow Loans rely on projected revenue and profitability metrics, suitable for businesses with strong margins but limited hard assets.

Example in Practice

Imagine a manufacturer purchases raw materials before sales revenue arrives. By pledging inventory or unpaid invoices, the company secures ABL funds to continue operations without waiting 30–90 days for customer payments.

Summary

What It Is: A loan secured by your business assets rather than dependent on your cash flow or credit score.
Why It’s Helpful: Speed, flexibility, scalability, and cost-effectiveness—especially for asset-heavy or high-leverage businesses.
Common Uses: Working capital, expansions, acquisitions, managing seasonal demand, or restructuring.
Collateral Remains Yours: Unlike factoring, you retain your assets, only encumbering them for the loan.

Asset-Based Lending (ABL)

Flexible funding backed by your business assets

What Is Asset-Based Lending?

Asset-Based Lending (ABL) is a financing solution that uses your company’s assets—such as accounts receivable, inventory, equipment, or real estate—as collateral for a loan or revolving line of credit. Instead of focusing only on cash flow or credit history, lenders look at the value of your assets to determine borrowing capacity.

Why Businesses Choose ABL

Fast Access to Capital – Approvals are often quicker than traditional bank loans because funding is secured by assets.
Revolving Credit Structure – Borrow, repay, and borrow again as your collateral fluctuates.
Scalable Funding – As your receivables or inventory grow, so does your borrowing ability.
Lower Interest Costs – Rates are typically more favorable than unsecured financing.
Flexibility – Use the capital for working capital, growth, acquisitions, or turnaround needs.
Access for Challenging Situations – Companies with high leverage, seasonal revenues, or restructuring needs can still qualify.

Common Uses of ABL

Supporting day-to-day working capital needs
Financing growth or expansion opportunities
Funding mergers and acquisitions
Bridging gaps during seasonal or cyclical cash flow dips
Providing liquidity for recapitalizations or turnarounds

Asset-based lending (ABL) inside: The Supply Chain is when financing is secured against assets that are directly tied to the production, movement, or sale of goods within the supply chain. Instead of lending based on projected cash flows alone, lenders look at collateral such as inventory, receivables, equipment, purchase orders, or even contracts. This is particularly useful in industries where supply chains are capital intensive and liquidity is often tied up in goods-in-transit or payables.

Here’s a breakdown of how ABL works inside the supply chain:

Collateral Types in the Supply Chain

Accounts Receivable (AR): Advance funding against unpaid invoices owed by buyers.
Inventory Financing: Lenders provide credit secured by raw materials, work-in-progress, or finished goods.
Purchase Order Financing: Funding based on confirmed purchase orders from creditworthy buyers.
Warehouse & In-Transit Goods: Assets stored in bonded warehouses or en route can sometimes be pledged.
Equipment & Logistics Assets: Trucks, containers, machinery, or even logistics tech systems as collateral.

Use Cases

Working Capital Bridge: Companies borrow against receivables to pay suppliers before buyers pay them.
Seasonal Cycles: Retailers or manufacturers finance bulk inventory purchases ahead of peak seasons.
Global Trade: Exporters/importers secure financing while goods are moving through ports/customs.
Supplier Support: Larger corporations use supply chain financing programs backed by ABL to help their suppliers get early payments.

Benefits

Unlocks liquidity tied up in the supply chain.
Reduces reliance on unsecured lines of credit.
Flexible—financing grows with the business as AR and inventory expand.
Often cheaper than equity financing.

Risks/Considerations

Asset valuation fluctuations (especially inventory).
Fraud risk (false invoices, double-pledging).
Cross-border enforcement challenges.
Heavy reporting and monitoring required by lenders.

Modern Trends

Supply Chain Finance + ABL Hybrid: Banks/fintechs advance payment to suppliers using buyer credit strength, collateralized by receivables.
Blockchain & IoT: Digital tracking of goods to reduce risk and increase lender confidence.
Embedded Finance in Logistics: Carriers and logistics platforms are offering working capital loans against freight bills.

In short, asset-based lending inside the supply chain is about converting “frozen” assets (goods, receivables, equipment) into immediate liquidity.