AFO · Glossary
Asset-Based Lending (ABL)
Revolving credit secured by receivables and inventory, with the borrowing capacity tied to the eligible collateral.
What this term means in practice
Asset-based lending is a revolving credit facility where the maximum borrowing capacity (the "borrowing base") is calculated dynamically from the eligible collateral — typically 85% of qualifying accounts receivable plus 50–65% of finished-goods inventory. The line grows as AR and inventory grow, pays down as cash lands, and accrues interest only on the drawn balance.
ABL is the right structure for working-capital-intensive businesses: distributors, manufacturers, and staffing firms whose customer collection cycles outrun their supplier payment cycles. The trade-off vs. a conventional cash-flow-underwritten line is more lender oversight (monthly borrowing-base certificates, periodic field exams) in exchange for higher headroom and looser covenants.
ABL is usually preferred over factoring when the business has diversified customers and healthy margins; the 1–4% per-invoice discount on factoring usually erodes more margin than the all-in ABL rate of Prime + 2–5%.
Where this matters in the catalog
Programs that turn on Asset-Based Lending.
ABL Revolver (Asset-Based Lending)
Revolving line tied to eligible receivables and inventory. Scales with the business.
Invoice Factoring & AR Finance
Immediate cash against outstanding receivables. Suits B2B businesses with long DSO.
See also
Related glossary terms.
- Glossary
- Glossary
- Glossary
Where the definition meets your situation.
The CPA can walk through how this concept applies to your business in twenty minutes — what providers will ask, where the negotiation matters, what the trade-offs actually look like in your numbers.