What Is Asset-Based Lending? | Business Lending Glossary

Definition

Loans secured by business assets like inventory, equipment, or receivables rather than cash flow or credit score alone.

Explanation

Asset-based lending (ABL) gives lenders a claim on specific collateral, so approval decisions weigh the liquidation value of those assets heavily. Businesses with strong balance sheets but irregular cash flow — such as manufacturers or wholesalers — often find ABL more accessible than cash-flow loans.

Example

A furniture manufacturer secures a $500,000 revolving credit facility using $800,000 in finished-goods inventory as collateral.

Why It Matters

ABL unlocks capital for asset-rich businesses that may struggle to qualify for traditional loans, turning balance-sheet items into working liquidity.

Frequently asked questions

Is asset-based lending the same as a secured loan?

All asset-based loans are secured, but not all secured loans are ABL — ABL specifically refers to facilities where the borrowing base is dynamically calculated against a formula tied to eligible assets.