Asset Based Lenders (“ABL Lenders”) look to tangible collateral to support their loans. They are more flexible on cash flow and capital than traditional bank loans and will accept some losses and higher leverage than a bank. Higher rate (non-bank) ABL lenders can even overlook some (but not all) character flaws. ABL lenders primary focus is lending against Accounts Receivable, Inventory and Equipment; some will take real estate as additional security.
There are many asset classes that banks shy away from for which there are specialized ABL Lenders to meet these needs. Examples of these are term loans on used equipment that are generally not eligible for leases, revolving lines of credit on inventories or loans against foreign receivables.
Some ABL Lenders monitor tightly like a factor while others only require a monthly borrowing base. Rates can vary from just 1% above a bank to 2-3% per month for inventory only lenders. Many smaller ABL lenders are independent however most of the larger ones are bank owned.
The bank-owned ABL Lenders have lower rates but more stringent lending criteria. Some smaller and independent ABL lenders may go as high as 90% advance on Accounts Receivable while bank-owned ABL Lenders are more likely at 80%. Inventory and Equipment loans have an advance rate of generally 50%-80% of the Orderly Liquidation Value of the collateral as determined by an appraisal of the collateral by a qualified Inventory and Equipment appraiser