ABL 101 – What assets can I finance against in an asset-based lending deal to fuel growth?


Andrew Rutherford asset based lending

Designed to give owners and directors of SME businesses an insight into asset-based lending, the next topic in our ABL 101 series Andrew Rutherford, Commercial Director at Arbuthnot Commercial Asset Based Lending looks at the assets that can be leveraged and why they would be used.

Put simply, there are two main kinds of business growth – organic and inorganic.

Most Small and Medium-sized Enterprises (SMEs) have a goal to grow their businesses as a result of their experience and the reputations they have built in their chosen markets. This is often referred to as organic growth.

Many management teams, particularly of mid-tier businesses that have the desire to scale quickly, see mergers & acquisitions (M&A) as a great way to increase the size of their businesses, access new markets and gain new competencies and resources. This is otherwise known as inorganic growth.

With both growth types, the ability to take your business to the next level requires a constantly replenished financial resource – the generation of increasing levels of working capital.

If you are running a growing business, asset-based lending (ABL) is a highly effective method to releasing funds tied up in your existing balance sheet assets.

This provides you with vital access to substantial levels of working capital to drive future growth, secure strategic acquisitions and make further investments in infrastructure.

With ABL, specific Loan to Values (LTVs) are attributed to each asset, maximising the availability of funding to fulfil the future working capital requirements of a fast-growing business.


For the vast majority of organisations, the largest asset class is debtors. Debtors typically form the core component of an asset-based lending solution.

Although invoice discounting can be another component. This is a flexible revolving working capital facility based on a company’s debtors that provides an immediate injection of funds, as well as supplying a continuous flow of dynamic ongoing funding.

The intrinsic link between the invoice discounting facility and the sales revenues of the business means that the availability of working capital is always perfectly aligned with the rate of growth.

Inventory (Stock)

For businesses that are required to carry substantial quantities of inventory, such as manufacturers, wholesalers or distributors, ABL allows them to raise additional funding on the strength of their inventory.

Inventory here, be it raw materials, partially finished products or finished products covers goods that a business holds for the purpose of selling into the market.

An asset-based lender will appraise the inventory to determine its resale value, which will then be used to secure your loan.

Plant & machinery

We also offer term loans against physical assets, such as plant & machinery. Providing that the business owns it, the higher the value of the business equipment, the more funds the business can borrow.

Besides plant & machinery, technology such as computer hardware, or even vehicles can be leveraged.


ABL lending can be secured against [a portion of] real estate that the business owns outright. This can be manufacturing space, land owned or any other property the business owns.

It does not necessarily matter if it is a freehold and long leasehold property, both can provide a comprehensive funding solution.

Cashflow loans

Additionally, cashflow loans may also be available, providing even higher levels of funding to support event-driven transactions such as acquisitions, management buyouts (MBOs), management buy-ins (MBIs) and corporate restructures.

Increasingly, ABL transactions are being structured with a cashflow loan element to support private equity sponsored deals to boost the available headroom.

Unlocking value tied up in assets

For many business owners, the key advantage of using an asset-based lending facility is that it generates a higher level of working capital than traditional sources of finance are generally able to release. The larger the pool of assets, the greater the potential volume of finance available.

Businesses that relied on traditional forms of funding in the past are now considering ABL to refinance, stabilise cashflow or fund organic and inorganic growth.

Today, ABL is also increasingly being used by businesses seeking to ‘pivot’ into new markets and to diversifying their products and services to gain a competitive advantage as they look to emerge stronger from the pandemic.

As a strategic growth management tool, ABL is as versatile as it is flexible.

It can be deployed for a variety of purposes, such as supporting your expansion or acquisition strategies, or helping you optimise your cashflow and working capital, giving you the cash reserves to take advantage of business opportunities as they arise.