What is Asset Based Lending ("ABL")?
Asset Based Lending (“ABL”) is very well established in the USA and is becoming increasingly so in the UK. “ABL” is a solution that will always include an Invoice Finance facility plus additional finance lines to unlock the value of your other business assets such as Stock, Plant & Machinery or Property.
It delivers sophisticated solutions for a variety of scenarios including growth, MBO’s, MBI’s, mergers and acquisitions, refinancing, turnarounds, public to private transactions and more recently cross border deals.
Generally transactions will be larger by nature with most funders operating in this market looking for transaction sizes in excess of £1Million.
How does "ABL" work?
“ABL” is more complicated than traditional Invoice Finance facilities and whilst there will always be an overriding legal agreement between your business and the lender, it is highly likely that some additional supplementary legal agreements will also be required so the funder will also have the protection of being able to exercise some control over the other assets that are being funded.
An “ABL” facility will allow your business to borrow funds against an overall global limit, which is then sub-divided into specific limits that are available against the various asset classes e.g. overall global limit £5Million, of which say £3Million is allocated against your sales invoices, £1Million against stock, £0.5Million against plant & machinery and £0.5Million against property.
Invoice Finance is assessed in an identical way to Factoring and Invoice Discounting facilities with the facility amounts available to other assets assessed following an indepedent valuation of these assets.
The funder will also need to be confident that your business has the necessary staff, expertise and systems to administer a facility of this type and to be able to produce meaningful management information on a regular basis.
How will "ABL" benefit my business?
- ABL will release cash from assets owned by your business that can be utilised immediately to meet your day to day funding needs.
- You retain full control of your sales ledger management.
- The facility is normally undisclosed or confidential so your customers will not be aware of the funders involvement.
- Funding is secured on your sales invoices and other assets such as stock, plant & machinery or property.
- Facilities are dynamic and can be tailored to your business needs rather than being rigid like more traditional overdraft facilities.
- Increasingly, ABL solutions are used to facilitate further acquisitions, Management Buy-out/Buy-Ins or other structured transactions.
- ABL facilities will have one point of contact thereby easing the administrative burden of dealing with different lenders for different asset classes or transactions.
- Some funders will offer additional services such as Bad Debt Protection, whereby for a premium, they will offer the option of including protection against bad debts. This will help protect future profits and cash flow.
What is the best solution for my business?
An ABL facility is available to most UK businesses, but given that they are more complicated, as a facility is being made available on more than one asset class, it is vitally important that a funder has access to the correct information and that this is available in a structured way.
Our team, are experts who have extensive experience in arranging these facilities and will work with you to ensure that the funder fully understands your business, assist you with generating the information that will be required, help you with terminology and the negotiation of terms if required, and finally liaise between you and the funder to deliver a credit approved facility.
For more information on Asset Based Lending or any of our other products and services, please complete the Get A Quote, Contact Form or email email@example.com. Alternatively simply telephone our national rate number 0845 601 5343 or contact your local Harrisons office, details of which can be found within the Contact Us section.