Search
 
Best Practices

A New Breed of Asset-Based Lenders

Despite the industry's sometimes negative reputation, ABL can be a preferred solution for borrowers who put in the effort to find the right lender.

By Andrew H. Moser | Updated on December 03, 2014
As access to capital has become increasingly restricted for middle-market companies, many businesses seeking liquidity have begun to see alternative financing solutions, like those offered by asset-based lenders, as an attractive option.

Asset-based lending (ABL) often comes under fire from critics who claim these loans drive borrowers to default, but it can be a useful tool. ABL provides liquidity to both distressed companies undergoing a turnaround process and growing companies looking to expand. It’s more expensive than traditional borrowing, but generally an ABL arrangement gives the borrower access to the lender’s expertise—which some midmarket businesses find to be worth the steep price tag, even if they have a number of borrowing options.

ABL emerged as a popular solution in the early 1990s, as an alternative for companies that had liquid assets on their balance sheet but could not secure traditional financing based on their earnings. Before long, the market became highly commoditized, and bankers’ decisions about how much liquidity to provide an organization became driven by a standardized borrowing-base formula. The years that followed saw little innovation in ABL; banks continued to offer formulaic, cookie-cutter products that did not accommodate companies with unusual characteristics, seasonal attributes, or atypical business cycles. Asset-based lenders became known as “lenders of last resort,” and the industry was often associated with failing companies and bankruptcy.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

 

Recommended Stories

Verizon Likes Investor Scrutiny of ESG Bonds

Verizon Likes Investor Scrutiny of ESG Bonds

Caleb Mutua |

The company has issued five green bonds, including a $1 billion offering earlier this month. “Added scrutiny ... enables our platform to continue to shine compared to the rest of the market.”

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2023 ALM Global, LLC. All Rights Reserved.