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."

Quote logo 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.”

Quote logo 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

Equity Crowdfunding
Equity
Using an online platform, investors buy shares in a company to help it grow.
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Overdraft
Debt
Businesses can borrow money on demand up to the limit of their overdraft. Overdrafts can be expensive, but a business will only pay interest on the amount they actually borrow.
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Leasing & Hire Purchase
Debt
A business can use Leasing and Hire Purchase to buy specific assets, like vehicles, machinery or other equipment.
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