Asset-based lending (ABL) is a financing option that many businesses turn to when seeking secured loans. With ABL loans, businesses can efficiently access fast cash by providing collateral, such as accounts receivable, inventory, equipment, or real estate. One of the most significant features of ABL loans is that they are collateral-based loans- this means that loan approval significantly depends on the collateral coverage rather than the company’s steady cash flow. Unlike traditional loans, ABL lenders can approve loan applications that otherwise may not secure approval from conventional banks.

Asset-based loans come in the form of revolving lines of credit, which offer businesses a steady flow of cash for daily operations or investments. Banks have specific parameters for evaluating loan applications, like ratios and covenants, which must be met for loan approval. Companies with a high debt-to-worth ratios may not meet these requirements, making it difficult for them to secure loans from a bank.

However, non-bank asset-based lenders can offer more flexibility in loan structuring based on future business prospects and collateral. Hence, ABL loans are an excellent option for businesses that need fast access to cash without having to rely solely on their cash flow.