Asset-based lending (ABL) is one of the most flexible financing tools for growing businesses, but it’s also one of the most misunderstood. Consider some common misconceptions:

• “We have plenty of collateral, so getting an ABL should be easy.”
• “We’ve done this before; the process will be the same.”
• “All ABL lenders evaluate companies the same way.”
• “ABL is only for companies with poor credit.”

Why Consider an ABL Over a Cash Flow Loan?

ABL isn’t just for distressed companies. It’s a powerful tool for businesses reinvesting heavily in growth. When sales, marketing, production, or product development consume cash, they create assets like AR, inventory, equipment, or brand IP. These may temporarily reduce free cash flow but will drive future revenue and profitability. ABLs helps unlock the value of those assets today.

What Is an Asset-Based Loan?

An ABL advances funds against the value of your assets, but every lender calculates that value differently. Advance rates, eligibility, and risk appetite vary widely:

• Cash: Not usually included in the borrowing base.
• Accounts Receivable (AR): 80–90% advance rates.
• Inventory: 40–60% of cost or 70–90% of net orderly liquidation value (NOLV).
• Machinery, Equipment, IP: Case-by-case, often lower percentages.

Some lenders prefer AR-heavy collateral and may cap inventory. Others focus on inventory or have flexible mixes. Understanding your lender’s priorities is crucial.

What Drives the Advance Rate?

Before issuing a loan, lenders conduct field exams and appraisals, reviewing:

• AR Dilution: How much of each dollar billed is collected after discounts, returns, or credits?
• Inventory Value and Turns: Historical margins, turnover, and obsolescence.
• Ineligibles: AR over 90 days, cross-aged accounts, contra accounts, intercompany AR, certain government or foreign accounts.

How Long Does It Take?

Prepared companies can complete an ABL in 30–60 days. Organization and data readiness make the difference between smooth execution and costly delays.

Where Capvia Adds Value

We bring lender and borrower experience to the table. Having managed hundreds of ABL transactions, we know what credit committees, field examiners, and appraisers need to see. Capvia helps you:

• Optimize your collateral pool
• Reduce ineligibles
• Select the right lender for your profile
• Navigate exams and appraisals efficiently

Thinking About an ABL?

Talk to Capvia first. We’ll ensure your company is prepared, your lender choice is strategic, and your liquidity is maximized. Learn more.