A guide to asset-based lending for businesses
Asset-based lending (ABL) is a way for established businesses to finance their growth by using their accounts receivable, inventory, equipment, machinery, property – or any other eligible business assets – as security against a business loan. At Funding Options, we work with a number of lenders across the business finance market. If you’re looking for asset-based lending – or a different kind of finance altogether – we can help you find the right funding for your business needs.
What are the benefits of asset-based lending?
Asset-based lending can be used by growing businesses or those who want to safeguard working capital in unpredictable markets. Here are some of the benefits:
Cash flow
Many businesses require business finance for working capital throughout their lifecycle. However, since many companies struggle to demonstrate positive cash flow, the lender may accept current and fixed assets as collateral instead.
Higher levels of funding
Higher levels of funding than invoice finance alone.
Faster release
Faster release of working capital against both inventory and property.
Flexible funding
Flexible additional funding for plant and machinery.
Control
More control over cash flow finance.
Financial stability
Can provide financial stability for SMEs and micro-businesses.
Tailored solution
A tailored solution built around the particular needs of the business.
How does Funding Options work?
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Types of assets that can be used to secure funding
Asset-backed lending
When it comes to asset-backed lending, it’s the current and fixed assets of a business that the lender uses to evaluate loan eligibility.
Debtor book
Debtor book i.e. amount owed by customers.
Inventory
Inventory, including raw materials, work-in-progress and finished goods.
Marketable securities
Marketable securities, such as those on a balance sheet.
Real estate
Real estate, land and other immovable property.
Equipment and machinery
Equipment and machinery, such as office equipment, furniture, and vehicles.
How much can you afford to borrow?
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
Want to understand the cost of your loan?
Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
Monthly payments
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Total interest
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Length of loan
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Total cost of loan
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Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
What is asset-based lending?
Types of business loan
Asset-based lending is a type of business loan that is secured against an asset your business owns. Lenders use assets such as inventory, accounts receivable, property, plant and machinery to assess whether you’re eligible for business finance.
Eligibility depends
The loan amount you’re eligible for depends, among other things, on the value of the asset you’re offering as collateral.
Attractive alternative finance option
This contrasts with other financing solutions, where lenders may focus more intently on your balance sheet, profitability and working capital. Asset-based lending could be an attractive alternative finance option for businesses operating in volatile markets, or companies experiencing unstable cash flow.
Who’s eligible for asset-based lending?
Established businesses
Asset-based finance lenders tend to lend to established businesses with quantifiable business assets (such as the ones listed above), and those with a trading history.
Inventory as security
If you intend using inventory as security for lending, your business will need to be able to prove its market value. In the UK, this amounts to the lower cost and the estimated selling price (less any costs to complete and sell).
Terms depend on the value
The terms and conditions of an asset-based loan depend on the value and type of the assets offered. Interest rates are dependent on your credit history, cash flow, and the number of years your business has been trading. As this process is monitored and regulated by the regulation authority, an independent third party will audit your financial or physical assets.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
