Definition
A revolving credit line secured by receivables, inventory or equipment.
Why it matters
ABL usually costs less than factoring but requires larger volumes and stronger reporting.
Where it shows up in a deal
An ABL facility arrives as a credit agreement with a borrowing base certificate attached, filed weekly or monthly, plus a field examination before closing and periodically afterward. The lender takes a lien on receivables and often inventory and equipment, while you keep ownership of the invoices and the collections function.
What it affects
- Pricing is usually lower than factoring, but reporting, audit and field-exam costs are real and recurring.
- Availability moves every time you file a certificate, so a slow collection month tightens the line immediately.
- Financial covenants and cash dominion provisions can restrict distributions and other borrowing.
- It is a loan: the receivables stay on your balance sheet and the draw appears as debt.
A worked example
Gross AR of $3,000,000 less $600,000 of ineligibles leaves $2,400,000; at an 85% advance that is $2,040,000. Inventory of $1,500,000 at a 50% advance adds $750,000. Availability is $2,790,000 against a $3,500,000 commitment - the commitment is the ceiling, not the amount you can draw.
The common mistake
Related terms
- Borrowing BaseThe maximum amount available under an asset-based line, calculated from eligible collateral.
- CollateralAn asset pledged to secure financing.
- Invoice DiscountingBorrowing against invoices while keeping control of collections.
- UCC-1 FilingA public notice that a lender has a security interest in a business's assets.
Questions about how asset-based lending affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
