Definition of Asset-Based Lending (ABL) Asset-Based Lending (ABL) is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. ABL lending practices are common with businesses and large corporations where assets are used as collateral for loans. Typically, these loans are tied to accounts receivable, inventory, machinery and equipment and are referred to as "revolving lines of credit."
ABL loans are common when a company needing financing becomes unable to raise capital in the normal marketplace or needs more immediate capital for project financing needs such as inventory purchases, mergers, acquisitions and debt purchasing. It is usually accompanied by higher interest rates as the level of risk for the lender is often greater. For example, the bank Wells Fargo made more money from their asset-based lending business than they did from the rest of their corporate business (both lending and fee based services).
Many financial service companies now use an asset-based lending package of structured and leveraged financial services. The majority of national investment banks (Goldman Sachs, RBC) and conglomerates (i.e. Citigroup, Wells Fargo), along with regional banks, offer these services to corporate clients.