Asset-Based Lending (ABL)

Category: finance

A specialized lending model where credit lines are structured directly against the liquidation value of specific liquid assets.

Unlike traditional cash-flow lending, ABL focuses heavily on accounts receivable and physical inventory values. The borrowing limit fluctuates dynamically via a "borrowing base" calculation, making it ideal for fast-growing companies with inconsistent net earnings.

Common Examples

• The wholesale distributor structured an asset-based lending facility, allowing their credit line to scale directly alongside their inventory levels.
• ABL underwriters conduct monthly audits of the firm’s aging accounts receivable reports to verify the collateral health metrics.