A traditional Asset Based Lender or ABL predominantly provides cash flow finance. The main facility they offer will be invoice invoice discounting however they can also provide stocking finance, plant and machinery finance/refinance and for the right customers commercial mortgages as well. Although the banks serve a purpose for many businesses the amount of facilities that are available are often dictated by the size of the balance sheet and and previous years trading performance. Therefore the level of available funding isn’t necessarily related to the amount of available security. How many times have you heard a business owner say that the bank has plenty of available security but the bank will not increase their facilities
ABL lenders look at things in a slightly different perspective. Whilst it is important that they buy into the business and are comfortable with its trading performance they are mainly concerned with the available level of security. An invoice discounting facility will provide funding of circa 85% of the unpaid debtors. They will also consider providing additional working capital secured against plant and machinery. They will lend anything up to 80% of its value depending on the circumstances around the deal. A true revolving stocking facility may also be appropriate and potentially commercial mortgage funding is also available. In addition an ABL lender is not necessarily after the clearing banking and as such you will be able to leave your clearing with your existing high street. This potentially makes for an easy transition to potentially more flexible and supportive funding arrangements.
