Asset-based lending (ABL)

Asset-based lending (ABL) is a loan whose available amount varies with the value of identified assets of the company: trade receivables and inventory first, equipment and real estate in some structures. The lender applies to each category of eligible assets an advance rate that reflects its realisation value. Trade receivables receive a higher rate than inventory, whose forced sale is less certain. The resulting sum forms the borrowing base, which the company recalculates each time it delivers a certificate to the lender, weekly or monthly depending on the agreement. The lender takes security over the financed assets: assignment or pledge of the receivables, pledge of the inventory. Its analysis focuses first on the quality and liquidity of these assets. This financing suits companies whose EBITDA is low or volatile, that are in a turnaround or whose working capital requirement is growing fast. According to the France Invest and Deloitte study of March 2026, private debt funds carried out 27 asset based financing transactions in France in 2025 for €94m, compared with 18 transactions and €42m in 2024. These amounts remain small relative to the €14,849m invested in corporate debt the same year. For a mid-cap company, ABL complements a senior debt or unitranche facility when an intercreditor agreement allocates the security: the ABL lenders are paid first from receivables and inventory, and the other lenders first from shares and fixed assets.

A mid-cap distribution company holds €120m of eligible trade receivables and €80m of eligible inventory. With an advance rate of 85% on receivables and 60% on inventory, its borrowing base reaches €150m (€102m + €48m). If eligible inventory falls to €60m the following month, the available amount drops to €138m.

• The eligibility criteria for receivables and inventory (ageing, concentration by customer, obsolescence)
• The advance rates by asset category and the lender’s discretionary reserves
• The frequency of the borrowing base certificate and the cost of field audits
• The sharing of security with the other lenders in the intercreditor agreement