ABL 101 -

What is the difference between asset-based lending and asset finance?

Designed to give owners and directors of SME businesses an insight into asset-based lending (ABL), the next topic in our ABL 101 series looks at how ABL differs from asset finance.

Man driving forklift truck in warehouse full of boxes


While asset finance and asset-based lending sound incredibly similar, they have very distinct roles, applications and advantages for businesses. Here, we look at the differences between asset finance and asset-based lending which are offered by Arbuthnot Latham’s subsidiaries, Arbuthnot Commercial Asset Based Lending (ACABL) and Renaissance Asset Finance (RAF).

What is asset-based lending?

Asset-based lending releases working capital from your entire balance sheet (accounts receivable, stock, plant & machinery and property), rather than specific individual assets. It enables businesses to generate the optimal level of working capital for strategic ‘events’, such as acquisitions, management buyouts and buy-ins, refinancing and restructuring. Cash flow loans may also be available (subject to EBITDA - Earnings Before Interest, Taxes, Depreciation, and Amortization) to provide even greater headroom. 

What is asset finance?

Asset Finance enables you to acquire the use of a business-critical asset, such as machinery, equipment and vehicles, by spreading the cost over its useful operating life. The two main forms of asset finance are Hire Purchase and Finance LeaseHire Purchase is a straightforward method of financing the purchase of an asset without the need for a large capital outlay. The cost of the asset is spread over the agreed term and paid by fixed monthly instalments that will not increase even if bank interest rates rise, enabling you to budget with certainty. As its name suggests, with this form of finance you own the asset once you have completed the final payment.

A Finance Lease, on the other hand, is a form of ‘rental agreement’ rather than a ‘purchase agreement’. Here, the leasing company buys and owns the equipment or vehicle and you simply pay for their use over an agreed period. With both forms of finance, you obtain immediate use of the equipment, conserving your capital budgets and preserving your existing lines of credit.

Asset Refinance allows you to raise cash from assets you already own. You can take finance secured against the value of the asset which you pay back over an agreed period. Any asset with a proven second-hand value could be suitable for refinancing. A cash injection can help you invest funds where they are needed to help you build your business further. A customer will only retain ownership under a sale and hire purchase back arrangement. In a sales and leaseback transaction, they transfer the title to RAF and rent it back.

Finance in action 

Although both asset finance and asset-based lending unlock the values tied up within existing assets, the best way to illustrate the differences between them is to look at example scenarios.

Arbuthnot Commercial Asset-Based Lending – fuelling growth

In this deal, a large precision engineering group sought significant levels of funding both to support the acquisition of a specialist manufacturing business and to provide ongoing working capital to enable further growth. The £5.23m all-asset funding package, which comprised facilities against debtors, plant & machinery and property together with a CBILS loan, was structured and delivered within an agreed timescale in line with the ambitions of the management team to drive scale and take the business to the next level.

Renaissance Asset Finance – generating cash

A large haulage company needed funds to acquire another business. They had approached their clearing bank and been told ‘we do not offer funding for acquisition’. A refinance package was structured on £450K of used trucks that they owned, to enable them to buy out the other company and expand their business. Increasingly businesses are looking to their assets to fund their future. We hope that this blog will give you food for thought in terms of how you can finance equipment and vehicles as well as unlock the hidden value in your existing business assets to realise your ambitions.

Asset Expertise

Arbuthnot Commercial Asset Based Lending is the specialist asset-based lending division of Arbuthnot Latham, focused on delivering facilities to SMEs and lower mid-market corporates. Arbuthnot Commercial ABL provides all-asset financing from £1m to £25m to support acquisitions, refinancing, cash-out and turnaround scenarios.


01293 227455

Renaissance Asset Finance (RAF) is the asset finance division of Arbuthnot Latham. Renaissance provides asset finance facilities to SMEs and high-net-worth individuals to support their investment in new or used capital equipment, soft and hard assets. As a specialist asset finance provider, Renaissance can finance a wide variety of assets with values typically in the range of £10k to £5m. 


01268 269500

With both companies, relationships are everything; they take the time to understand a client’s business and funding requirements, so they can offer tailor-made, practical solutions that help enable success and growth.

Please visit our dedicated business recovery hub for more information aimed at supporting your business and your teams, as you transition to a post-lockdown working environment.

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.

Renaissance Asset Finance Limited is a wholly-owned subsidiary of Arbuthnot Latham and Co., Limited. We are authorised and regulated by the Finance Conduct Authority and are members of the FLA and NACFB. Registered in England and Wales 8885289.


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