What is Asset-Based Lending?
Asset-based lending (ABL) is essentially a line of credit using your accounts receivable
as collateral to provide additional working capital for your business. In an ABL
relationship, Apple Capital Group advances funds to your account against a line of credit (LOC) based on a percentage of your eligible outstanding receivables. We have a lockbox in which payments from your customers are received and credited against the outstanding
balance of your LOC. Unlike factoring, ABL offers you the flexibility to manage the
timing of your cash advances so you can control your cost of money. Asset-based
lending is generally used by businesses in start-up, growth mode, or by businesses
experiencing a shortage of cash. It is also used by those businesses currently in a
factoring relationship that desire more control of their finances.
Example Availability: Following is a simplified example of the available funds for an
ABL line of credit where the company has $1 million of receivables outstanding and has
a loan of $400,000 against their receivables:
Outstanding accounts receivable balance $1,000,000
Less A/R > 90 days past due (ineligibles) (75,000)
Total eligible A/R 925,000
Available to borrow (80% of eligible) $740,000
Less the outstanding LOC balance (400,000)
Available to borrow $340,000
