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Asset-Based Lending (ABL) — Wellesley Collective

Commercial Financing

Asset-Based Lending (ABL)

Loans secured by business assets such as accounts receivable and inventory.

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Who this is for

Wholesalers, distributors, and manufacturers · Companies whose invoices or inventory are the real story · Businesses growing faster than a bank line will allow · Operators in a turnaround who still have collectible receivables

Home / Commercial Financing / Asset-Based Lending (ABL)

Asset-based lending is a loan backed by what the business already owns and is owed — usually unpaid customer invoices and inventory — rather than by last year’s profit alone.

How it works

If your company is growing fast, coming through a rough patch, or holding a lot of value in receivables and stock, a traditional cash-flow loan can say no even when the balance sheet is solid. ABL turns those assets into a borrowing base. You can typically borrow a percentage of eligible receivables and a smaller percentage of eligible inventory. Reporting is tighter than a simple term loan — agings and inventory certificates are normal — because the lender is underwriting the assets as they turn. That extra work is the trade for more capacity.

Who this is for

  • Wholesalers, distributors, and manufacturers
  • Companies whose invoices or inventory are the real story
  • Businesses growing faster than a bank line will allow
  • Operators in a turnaround who still have collectible receivables

What it typically covers

  • A revolving or term facility tied to A/R and inventory
  • Growth, seasonal builds, and selected turnarounds
  • Borrowing capacity that can rise as assets rise
  • A structure based on the conversion cycle, not only on EBITDA

A simple example

A distributor lands a big retail account. Receivables jump from $400,000 to $900,000. An ABL line can increase with those invoices, instead of capping you at last year’s cash-flow number.

Good to know

  • Ineligible invoices (very old, related-party, disputed) do not count. We review the aging honestly.
  • This is more reporting than a simple loan. It is also more flexible when assets are the strength.

Coverage, eligibility, and terms vary by location and underwriting.

Guides

Read this before you quote or apply.

Guide

Working capital vs. a business line of credit

A lump sum for a defined gap, or a reusable facility you draw and repay. Which one matches the cash-flow problem.

Read guide