What is Asset Based Lending?
Asset based Lending or ABL is a logical extension of the sevices provided by a receivables financier. Instead of funding only the most liquid of assets, the debtors, the ABL provider will consider the client company's other assets such as raw materials, stock, plant and machinery and fixed assets such as property. The ABL lender will consider the overall value of the basket of assets and create a lending package based on their current (and ongoing ) value.
ABL facilities are therefore generally more complicated structures combining revolving credit lines based on current assets with amortising loans based on fixed assets. ABL is accordingly used for bigger clients, typically in a restructuring or MBO situation. Syndication between ABL companies for very large facilities is very common.
Asset based lending is a relatively new form of commercial finance originating from the US and at present is mostly offered in the UK.