Running a business often means juggling expenses, payroll, inventory, and growth plans—sometimes with limited cash on hand. When traditional loans aren’t accessible or fast enough, asset-based lending (ABL) can be a powerful solution to free up working capital using the assets you already own.
If your company holds inventory, equipment, or outstanding invoices, you may be sitting on untapped liquidity. Here’s how to use asset-based lending to unlock that capital and keep your business moving forward.
Asset-based lending is a type of financing where a business secures a loan or line of credit using its assets as collateral. Rather than relying on your credit score or profitability, lenders focus on the value of your assets to determine your borrowing power.
Common assets used for ABL include:
Accounts receivable (unpaid customer invoices)
Inventory
Equipment or machinery
Real estate
Marketable securities
This form of lending is especially useful for companies with valuable assets but tight cash flow—like wholesalers, manufacturers, and service providers.
Here’s a simplified breakdown of how asset-based lending works:
You identify business assets to pledge as collateral
The lender evaluates and appraises the asset’s current value
You receive a loan or line of credit based on a percentage of the asset value (typically 70–90% for receivables; 50–70% for inventory)
You repay the lender according to agreed terms—usually monthly
If you default, the lender has a legal claim to the assets
Unlike unsecured loans, this method gives lenders more confidence and allows you to access larger amounts of working capital.
Faster access to cash than traditional loans
Flexible repayment terms aligned with business cycles
No need for perfect credit—the asset value matters more
Scales with your business as assets grow
Avoids equity dilution unlike investor funding
Asset-based lending can serve as a short-term liquidity boost or a long-term funding strategy, depending on your needs.
A mid-sized manufacturer had $700,000 tied up in accounts receivable and slow-moving inventory. Instead of applying for a traditional loan, they secured a $500,000 asset-based line of credit using their AR and inventory. With the funds, they hired new staff, upgraded equipment, and expanded their marketing—all without waiting months for payments to come in.
This financing method is ideal for:
B2B companies with consistent accounts receivable
Seasonal businesses with fluctuating revenue
Inventory-heavy operations like wholesale, retail, or distribution
Companies undergoing rapid growth or expansion
Firms recovering from downturns but with solid assets
It’s especially helpful when your cash flow is strained but your balance sheet is strong.
Prepare financial statements and balance sheet
Identify qualifying assets to pledge
Research asset-based lenders or banks with ABL divisions
Get your assets appraised (if required)
Apply with documentation (AR aging reports, inventory lists, etc.)
Negotiate the terms and advance rate
Use funds for operations, payroll, inventory restock, or expansion
Following this process can speed up approval and ensure a smooth funding experience.
| Feature | Asset-Based Lending | Traditional Loans |
|---|---|---|
| Approval Basis | Asset value | Creditworthiness |
| Speed | Faster | Slower |
| Flexibility | Higher | More rigid |
| Use of Funds | Any business purpose | May be restricted |
| Risk | Asset seizure if defaulted | Legal and credit damage |
“Only struggling companies use ABL.”
Not true—many fast-growing businesses use it to scale quickly.
“You’ll lose your assets if you borrow.”
Only if you default. Most businesses repay on time and retain full control.
“It’s too complicated.”
ABL is actually straightforward once you identify eligible assets and understand your needs.
Banks with commercial lending divisions
Independent asset-based lenders
Online platforms that specialize in receivables or inventory financing
Community Development Financial Institutions (CDFIs)
Industry-specific lenders (e.g., manufacturing, construction)
Make sure your lender has experience working with businesses in your industry and offers transparent terms.
Asset-based lending gives you the power to turn balance sheet items into usable cash—fast. If you're holding valuable receivables, inventory, or equipment, those assets could be the key to freeing up business capital when you need it most.
Whether you’re managing cash flow, funding new projects, or simply staying competitive, this financing strategy can give you the financial agility you need to succeed.