Strategic Corporate Services
Asset Based Lending
What is asset based lending?
Businesses with valuable assets often have access to financing that does not rely solely on traditional credit criteria. Asset based lending (ABL) allows companies to secure capital using tangible business assets as collateral, providing liquidity while maintaining ownership of operational resources. This form of financing is commonly used by companies that need substantial funding tied directly to the value of their receivables, inventory, equipment, or real estate.
Strategic Corporate Services offers asset based lending solutions designed to help businesses unlock capital embedded in existing assets. This approach can support operational stability, expansion initiatives, restructuring efforts, or transitional periods when conventional financing may be difficult to obtain.
How Asset Based Lending Works
Asset based lending involves establishing a credit facility secured by specific business assets. The borrowing capacity is determined primarily by the value and quality of the collateral rather than solely by credit scores or profitability metrics. As asset values change, the available borrowing base may adjust accordingly.
Businesses in Saratoga Springs often use ABL when they hold significant receivables or inventory but need immediate liquidity to fund operations or growth. Because funding is tied to measurable assets, lenders can extend larger credit limits than might be available through unsecured financing.
Structure of Asset Based Loan Facilities
Borrowing Base Calculation
Lenders determine how much can be borrowed by applying advance rates to eligible assets, such as a percentage of accounts receivable or inventory value.
Revolving Credit Access
Many ABL arrangements function similarly to a line of credit, allowing businesses to draw funds as needed within the borrowing base.
Ongoing Monitoring
Periodic reporting ensures that collateral values remain sufficient to support outstanding balances.
Collateral Control Agreements
Lenders may establish legal rights to the pledged assets to secure repayment.
Types of Assets Commonly Used as Collateral
Asset based lending can incorporate multiple asset categories, depending on the nature of the business and the value of available collateral. Strategic Corporate Services assists Saratoga Springs companies in identifying eligible assets and structuring facilities accordingly.
Accounts Receivable Financing
Trade Receivables
Invoices owed by creditworthy customers can serve as a primary collateral source. Lenders evaluate payment history, aging schedules, and customer concentration.
Government or Contract Receivables
Payments due from public entities or large corporate clients may be considered highly reliable collateral when properly documented.
Inventory Financing
Raw Materials and Work in Progress
Manufacturers can leverage materials and partially completed goods as part of the collateral pool.
Finished Goods
Completed products ready for sale often hold measurable value that can support borrowing capacity.
Equipment and Fixed Assets
Machinery and Vehicles
Operational equipment with resale value may be included in asset based lending arrangements.
Technology Infrastructure
Certain high-value technological assets can also qualify depending on depreciation and market demand.
Real Estate Assets
Commercial Property
Owner-occupied or investment properties may enhance borrowing capacity when included as collateral.
Land Holdings
Developable land with documented value can support financing in specific cases.
Asset Based Lending for Complex Financial Situations
ABL is frequently used by businesses undergoing transitions such as rapid growth, restructuring, mergers, or seasonal fluctuations. Because approval relies on asset value rather than profitability alone, companies with uneven earnings or limited credit history may still qualify.
Strategic Corporate Services works with Saratoga Springs businesses to structure lending facilities that align with operational realities. Asset based financing can provide stability during periods when traditional loans may impose restrictive covenants or insufficient limits.
Situations Where ABL May Be Utilized
Rapid Expansion
Growing companies may require capital faster than retained earnings or conventional loans can provide.
Turnaround or Restructuring
Businesses stabilizing operations can use asset-based funding to maintain liquidity during recovery phases.
Seasonal Working Capital Needs
Industries with cyclical revenue patterns may rely on ABL to bridge low-revenue periods.
Acquisition Financing Support
Companies pursuing acquisitions may leverage existing assets to secure additional capital.
Advantages of Collateral-Driven Financing Structures
Asset based lending aligns borrowing capacity with the scale of a company’s operations. As receivables grow or inventory levels increase, available funding may expand accordingly. This dynamic structure can provide flexibility that fixed loan amounts cannot offer.
Strategic Corporate Services helps Saratoga Springs clients evaluate how collateral-based financing fits into broader financial planning. Careful structuring ensures that borrowing levels remain sustainable relative to operational needs and asset liquidity.
Key Characteristics of ABL Facilities
Larger Potential Credit Limits
Substantial asset pools can support higher borrowing capacity than unsecured loans.
Flexible Use of Funds
Capital obtained through ABL can typically be applied to a wide range of business purposes.
Collateral-Driven Risk Assessment
Approval depends more on asset quality than on traditional credit scoring alone.
Periodic Audits and Reporting
Borrowers may be required to provide regular updates on asset values and financial performance.
The Asset Based Lending Process
Securing an ABL facility involves detailed evaluation of assets, financial documentation, and legal agreements. Lenders conduct due diligence to verify ownership, value, and marketability of collateral. This process may include appraisals, inventory inspections, and accounts receivable analysis.
Strategic Corporate Services guides Saratoga Springs businesses through each stage, from preliminary assessment to final funding. Proper preparation can streamline approval timelines and ensure that borrowing capacity accurately reflects asset value.
Key Steps in Establishing an ABL Facility
Asset Identification and Valuation
Eligible collateral is documented and appraised to determine borrowing potential.
Financial Review
Lenders examine financial statements, operational data, and transaction history.
Legal Documentation
Security agreements establish the lender’s rights to pledged assets.
Funding and Ongoing Administration
Once approved, funds can be accessed according to the borrowing base, with periodic reporting required to maintain compliance.
Strategic Corporate Services
Asset based lending provides businesses with a powerful financing tool that leverages existing assets to generate immediate capital. By tying borrowing capacity to receivables, inventory, equipment, or property, companies can access funding aligned with the scale of their operations. Strategic Corporate Services offers structured asset based lending solutions designed to support liquidity, growth, and operational continuity while allowing businesses to retain control of their assets and pursue long-term objectives.
