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ABL 101 -

What is asset-based lending (ABL)?

Welcome to ABL 101 – our new initiative, which monthly, will examine a core aspect of asset-based lending to give owners and directors of SME businesses an insight into the mechanics and benefits of this popular type of lending.


26th January 2021


Over the past two decades, asset-based lending (ABL) has progressed from a little-known form of finance emanating from the US to a mainstream funding solution that is driving the powerhouse of the UK economy, the SME sector.

Asset-based lending is a form of business finance that is based on the value of all available balance sheet assets, including debtors, stock, plant & machinery as well as freehold and long leasehold property. This structure typically generates a higher level of working capital than traditional sources of finance. For this reason, asset-based lending is widely regarded as a strategic enabler for a wide variety of business sectors, including services, manufacturing, wholesale and distribution.

ABL is widely regarded as a working capital solution of choice for SMEs and mid-sized businesses for transactions such as mergers and acquisitions, management buy-outs, management buy-ins, reorganisations, debt restructures and turnarounds.


How does asset-based lending work? 

Unlike traditional finance providers, asset-based lending specialists attribute Loan to Values (LTVs) against debtors, stock, plant & machinery and property.

The percentages applied may vary from lender to lender and some providers may wish to adhere to a strict policy of maintaining the largest core component of the facility as the invoice discounting element.

The advance rates below represent Arbuthnot Commercial Asset Based Lending’s rates, which are positioned at the upper end of the market in terms of LTV, and we don't have the typical constraints in respect of the proportionality of the asset mix.


  • Contractual advance rate up to 90% on eligible receivables


  • Typically 100% of valuation of finished goods less reserves
  • 90-day realisation


  • Typically 85% ex situ
  • 120-day valuation
  • Up to 5 years amortising


  • Typically up to 80%
  • 180-day valuation
  • Up to 15 years amortising loan


  • Up to 5 years amortising loan
  • Up to 2x EBITDA strength and sustainability 

Conventional forms of financing are frequently unable to provide the level of funding that many businesses require, particularly in the current environment, where the provision of ongoing finance above and beyond the initial transaction is critical for sustained growth. ABL can also help stabilise operations for companies that have tight cash flows or seasonal fluctuations in revenues.

In the foreseeable future, the environment faced by businesses will be ‘VUCA’ in nature; this refers to an environment that is Volatile, Uncertain, Complex and Ambiguous. In the eventuality that the economic cycle turns, institutions tighten their credit policies and liquidity begins to dry up, asset-based lending offers a certain and secure funding option, providing businesses with greater financial stability and predictable cash flows.

If you want to know more on how asset-based lending can be used achieve your business goals, please do get in touch at


Gatwick Office: The Beehive, City Place, Gatwick, RH6 0PA

Registered in England and Wales no. 10915339. Arbuthnot Commercial Asset Based Lending Limited’s registered office is Arbuthnot House, 7 Wilson Street, London, EC2M 2SN. Arbuthnot Commercial Asset Based Lending is not authorised and regulated by the Financial Conduct Authority.


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