Asset Based Lending

Why Use Asset Based Lending?

We Can Help You Put Your Business Assets to Good Use

When growth is accelerating, cash flow rarely arrives on the same timeline as expenses. You might win a major contract, need to stock up on inventory, or ramp hiring before your next invoice gets paid. In these moments, asset based lending can unlock working capital that grows with your business, because the credit line is tied to your receivables and inventory rather than a fixed cap.

At Noble Funding, we help established companies evaluate and structure asset based lending facilities and, when needed, pair an ABL line with fast junior capital designed to close quickly and coexist with a bank or senior secured lender.

What Is Asset Based Lending?

Asset based lending (ABL) is financing secured by assets on your balance sheet. Most commonly, it is a revolving line of credit backed by accounts receivable or accounts receivable plus inventory. Depending on the situation, an asset based facility can also include term loans secured by machinery and equipment or owner occupied commercial real estate.

Unlike a cash flow loan that is primarily underwritten against projected future cash flow, asset based lending availability is driven by the quality and value of the pledged assets and the lender’s eligibility rules.

How Asset Based Lending Works (Borrowing Base, Advance Rates, and Availability)

Asset based lending is built around the borrowing base, which is the collateral base agreed to by the borrower and lender that limits how much the lender will advance. The borrowing base is typically calculated by applying advance rates to eligible collateral categories (such as eligible receivables and eligible inventory), then reducing availability for any lender reserves or ineligibles.

1) Eligible collateral is defined

Eligibility rules often focus on things like receivables aging, customer concentrations, dilution/credits, inventory type, and where inventory is stored

2) Advance rates are applied

Advance rates reflect the lender’s view of collateral liquidity and risk. In general, receivables tend to support higher advance rates than inventory, because receivables are often more readily convertible into cash.

3) Reporting and monitoring are part of the deal

ABL facilities commonly require frequent reporting such as receivables agings and inventory reports, and may include field exams and appraisals. Regulators describe borrowing base certificates and supporting reports as key sources of information, with verification through regular field audits.

Typical Borrowing Base Example (Simple Illustration)

Here is a simplified example to show how asset based lending availability can be calculated.

Eligible accounts receivable (less than 90 days): $5,000,000

Eligible finished goods inventory: $3,000,000

Advance rate on A/R: 85%

Advance rate on inventory: 60%

Borrowing base availability (before reserves) =
($5,000,000 × 85%) + ($3,000,000 × 60%) = $4,250,000 + $1,800,000 = $6,050,000

Actual structures include eligibility details, lender reserves, and reporting frequency, and availability can change as receivables collect and inventory levels fluctuate.

Common Types of Asset Based Lending Facilities

Asset based lending is not one single product. It is a framework that can be tailored to the assets you have.

A/R only revolver

A revolving line secured by accounts receivable, often with interest only payments.

A/R plus inventory revolver

A revolver that includes eligible inventory in the borrowing base, useful for distributors, manufacturers, and asset intensive businesses.

Equipment and real estate secured term loans

Used when the strongest collateral is machinery, equipment, or owner occupied commercial real estate.

Why Companies Use Asset Based Lending

Asset based lending is often a strong fit when a business is asset intensive or scaling faster than conventional credit boxes allow.

1) High growth without a hard cap

ABL lines can expand as receivables and inventory rise, helping companies avoid being constrained by fixed bank limits.

2) Cyclical or uneven cash flow

Businesses with seasonal working capital swings often prefer a structure where availability tracks the assets that rise and fall with operations.

3) Situations where traditional underwriting is tighter

Noble Funding’s asset based lenders may approve companies with weaker balance sheets or negative cash flows (pricing may differ based on risk.

Pros and Tradeoffs of Asset Based Lending

Advantages

More availability tied to assets rather than purely profitability

Flexibility compared to certain other lending types, because collateral support is central

Considerations

More rigorous collateral monitoring (field exams, appraisals, frequent reporting)

Operational discipline required to avoid unintended defaults due to reporting and eligibility mechanics

Asset Based Lending with Noble Funding

Noble Funding’s asset based lending program is designed for companies that want revolving access to working capital based on receivables and inventory.

Facility size

Asset based lending from $2,000,000 to $35,000,000+.

Typical collateral and advance rates

Revolving lines of credit on accounts receivable, or accounts receivable and inventory

Typical borrowing base formula: 85% to 90% on accounts receivable less than 90 days old, and 50% to 65% on finished goods inventory

In some cases, more complex structures can include raw materials or in transit inventory

Speed of process

Term sheets can be issued within 72 hours of receiving a financial package.

When the Borrowing Base Is Not Enough: Add Junior Capital Without Disrupting Your Senior Lender

Even with a strong ABL facility, companies can run into timing gaps: a borrowing base constraint, a large PO, a bulk inventory buy, or a short runway before a refinance.

Noble Funding specializes in junior bridge funding and junior capital from $300,000 to $10,000,000+, typically for companies with $5 million to $150 million in annual revenue.

Key features that often matter in ABL capital stacks:

Fully subordinated to a bank or senior secured lender via inter-creditor agreement

Can often be structured fully unsecured with no blanket UCC filing on corporate assets

Early payoff discounts are typically available, often up to an initial six month period

Companies can be positive or negative EBITDA depending on the situation and path to repayment

If you need $2 million to $3 million quickly, Noble Funding’s process is designed for urgency. For qualified borrowers with complete information, funding can often happen in a small number of business days.

What You Should Prepare for an Asset Based Lending Conversation

To move fast on an asset based lending request, you typically want to have:

Recent financial statements

Bank statements

Accounts receivable aging and accounts payable aging

Inventory reports (if inventory is part of the borrowing base)

Summary of use of proceeds and timing of need

Why Businesses Choose Noble Funding

Noble Funding is built around speed, flexibility, and real middle market experience:

Founded in 2005, with more than two decades in business

A+ rating with the Better Business Bureau, with zero complaints since 2005

Funded over $1 billion in business loans and lines of credit nationwide

Get a Quote for Asset Based Lending

If you are exploring asset based lending (or want to pair an ABL facility with fast junior capital), Noble Funding can help you evaluate structure, collateral, and timing.

Call 1-800-916-3196 or request an instant quote through the NobleBusinessLoans.com website.