Asset-Based Lending

Asset-Based lenders typically use a company’s physical assets as security for lending. Assets like debtors, stock, equipment, machinery and property can all be used as security for Asset-Based Lending.

The number of UK businesses using Asset-Based Lending increased by almost a third over 12 months

UK Finance Quarterly Statistics

Key requirement

You must have assets of value on your balance sheet

Key benefit

Use the value in assets not normally considered by banks and traditional lenders

Key consideration

You may not be able to use an asset that is being used as security for another form of finance.

What is Asset-Based Lending?

Asset-Based Lending is a form of Asset-Based Finance that uses assets on your balance sheet as security against lending.

This includes physical assets like debtors, stock, equipment, machinery and property, and can also include intangible assets such as Intellectual Property (IP).

"Cashflow is the lifeblood of any business, and Asset-Based lending is one type of finance facility that can help firms take advantage of growth opportunities without damaging their working capital."

Richard Evans Lloyds Commercial Banking

What are the benefits of Asset-Based Lending?

Asset-Based Lending is growing in popularity in the UK. It allows businesses to unlock the value tied up in assets like debtors, stock and equipment, and provides funds quickly.

Benefits of Asset-Based Lending

Flexible

few restrictions on how you can spend the facility.

Quick

could take as little as four weeks if you meet the criteria.

Diverse

use the value in assets that aren’t normally considered by traditional lenders.

Control

keep hold of equity.

Options

use other forms of finance alongside Asset-Based Lending.

Stability

agreement lengths and repayments can be fixed.

Cashflow

improve cashflow by leveraging the value of untapped (unencumbered) assets.

Risks of Asset-Based Lending

Your credit report

Asset-Based Lenders will conduct credit checks and due diligence to determine your eligibility. A hard credit check will show on your credit report and may affect your credit rating.

Charges

If you default on payments or attempt to pay off the loan early, you may be faced with charges. Late payments may also affect your credit report.

The asset seized

Asset-Based Lenders may seize the asset and sell the collateral in the event of default.

Am I eligible for Asset-Based Lending?

  1. Are you an established business with assets and a trading history?

    Without assets or a trading history, Asset-Based lenders will not provide a facility.

  1. Do you have assets of value on your balance sheet?

    The value of your assets could reflect the amount of finance you’re eligible for.

  1. Do you have detailed and accurate financial statements covering your trading history?

    Asset-Based lenders base their decision on your financial performance, trading history and the value and type of assets held. This information must be clear and show your ability to repay the facility.

  1. Do you have commonly sold inventory?

    If you’re using stock or inventory as security for lending, you need to show that it is sold. This shows you have money coming in regularly to pay off your facility.

The amount of finance you are looking for will also be considered by Asset-Based lenders. Typically, Asset-Based lenders provide facilities around the £5m plus mark however some providers will also offer facilities worth £1m plus.

“As a first port of call, companies should consult with a trusted adviser to see how Asset-Based Lending can meet their funding needs.”

Richard Evans Lloyds Commercial Banking

Need to know / Checklist

  • How long is the borrowing period?
  • What is the interest rate on the facility?
  • What is the advance rate against the various assets?
  • How much will you pay for the finance facility in the long run?
  • Are there charges for early repayment?

Is Asset-Based Lending right for you?

About your business

Business stageEstablished with assets and a trading history
Size of facilityVariable – dependent on asset values
SectorsAny
RegionsAny

Where you can get Asset-Based Lending

There are specialist Asset-Based lenders in the UK, as well as lenders who offer an Asset Based Lending product, including high street banks.

What’s your next step?

Glossary

Unencumbered – Free of debt or other financial liability. Essentially, if an asset is unencumbered, it is not being used as security against lending.

Other finance options

Angel Investment
Equity
Angel Investors act as mentors and invest their own money in early-stage businesses for a share in the company.
{"mTitle1":"ANGEL INVESTMENT","mTitle2":"Investors like","mPara2":"Early-stage businesses with a turnover of less than £5m. They invest in any sector but like businesses with a scalable business proposition.","mTitle3":"You're looking for","mPara3":"Between £15,000 and £500,000 within two to six months from a single Angel for working capital, product development, entry into new markets, to build teams or increase sales. Large Syndicates may offer up to £2m.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/angel-investment"}
{"section1Name":"ABOUT ANGEL INVESTMENT","section1CTA":"LEARN MORE","section1URL":"/angel-investment","section1Rows":{"row1":{"Title":"Purpose of finance","Content":"Working capital, product development, entry into new markets, build teams, increase sales"},"row2":{"Title":"Amount of finance","Content":"Usually £15k-£500k, but large Syndicates may offer up to £2m"},"row3":{"Title":"Duration of finance","Content":"Typically 3-8 years"},"row4":{"Title":"Cost of finance","Content":"None"},"row5":{"Title":"Time to finance","Content":"2-6 months"}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/angel-investment","section2Rows":{"row1":{"Title":"Business stage","Content":"Generally early stage, pre-revenue or pre-profit"},"row2":{"Title":"Annual turnover","Content":"Less than £5m"},"row3":{"Title":"Sectors","Content":"All sectors, but especially suitable for companies with a scalable business proposition"},"row4":{"Title":"Regions","Content":"All regions"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":"https://www.british-business-bank.co.uk/finance-hub/wp-content/uploads/2018/04/Angel-Investments-teal-gold-purple2.pdf"},"item2":{"txt":"view the application checklist","url":"https://www.british-business-bank.co.uk/finance-hub/angel-checklist"}}}
Private Equity
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
{"mTitle1":"PRIVATE EQUITY","mTitle2":"Investors like","mPara2":"Mature, growing and profitable business with an annual turnover typically between £10m and £100m.","mTitle3":"You're looking for","mPara3":"Finance in the region of £10m to £50m to shake up your business through management buy-outs, acquisition, product development or entry into new markets.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/private-equity"}
{"section1Name":"ABOUT PRIVATE EQUITY","section1CTA":"LEARN MORE","section1URL":"/private-equity","section1Rows":{"row1":{"Title":"Purpose of finance","Content":"Change in shareholder ownership, management buy-outs, acquisition, product development, entry into new markets"},"row2":{"Title":"Amount of finance","Content":"£10m-£50m"},"row3":{"Title":"Duration of finance","Content":"3-5 years"},"row4":{"Title":"Cost of finance","Content":"Monitoring and director fees; loan note interest"},"row5":{"Title":"Time to finance","Content":"Minimum of 3 months but can take up to a year"}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/private-equity","section2Rows":{"row1":{"Title":"Business stage","Content":"Mature and growing; profitable"},"row2":{"Title":"Annual turnover","Content":"£10m-£100m"},"row3":{"Title":"Sectors","Content":"All sectors"},"row4":{"Title":"Regions","Content":"All"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":"https://www.british-business-bank.co.uk/finance-hub/wp-content/uploads/2018/04/private_equity_purple_teal_yellow_white_disclaimer.pdf"},"item2":{"txt":"view the application checklist","url":"https://www.british-business-bank.co.uk/finance-hub/private-equity-checklist"}}}
Start Up Loan
Debt
A government-backed loan that helps people who are starting their own business.
{"mTitle1":"START UP LOAN","mTitle2":"Providers like","mPara2":"Businesses within the first two years of trading or that have yet to start.","mTitle3":"You're looking for","mPara3":"Up to £25,000 unsecured loans to help start or grow your business.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/start-up-loan"}
{"section1Name":"ABOUT START UP LOAN","section1CTA":"LEARN MORE","section1URL":"/start-up-loan","section1Rows":{"row1":{"Title":"Purpose of finance","Content":""},"row2":{"Title":"Amount of finance","Content":""},"row3":{"Title":"Duration of finance","Content":""},"row4":{"Title":"Cost of finance","Content":""},"row5":{"Title":"Time to finance","Content":""}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/start-up-loan","section2Rows":{"row1":{"Title":"Business stage","Content":"Yet to start or trading for less than two years"},"row2":{"Title":"Annual turnover","Content":"Any"},"row3":{"Title":"Sectors","Content":"Some exclusions apply (see <a href='https://www.startuploans.co.uk/am-i-eligible/' target='_blank'>here</a>)"},"row4":{"Title":"Regions","Content":"Any"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":""},"item2":{"txt":"view the application checklist","url":""}}}