Asset-Based Lending for Business Acquisition: When ABL May Fit a Deal

Asset-based lending for a business acquisition may be worth evaluating when the company being purchased has meaningful business assets such as accounts receivable, inventory or equipment. Instead of looking only at general cash flow, an asset-based lender may also evaluate the quality and value of eligible business assets.

If you are actively buying a business and want to understand whether asset-based lending or another financing structure may fit, start with the EIN Business Funding Quick Lead Pre-Qualification and provide the purchase amount, business profile and intended use of funds.

What Is Asset-Based Lending for a Business Acquisition?

Asset-based lending, commonly called ABL, is financing where eligible business assets can play an important role in the lender’s credit decision and borrowing structure. Depending on the provider, assets may include qualifying accounts receivable, inventory, equipment or other business assets.

ABL does not eliminate the need for underwriting. The lender can still review the buyer, the operating company, existing debt, cash flow, industry and the overall acquisition structure.

When May ABL Be Relevant to an Acquisition?

ABL may be more relevant when the target company has a meaningful asset base that can support a financing structure. A distribution company with substantial inventory, a B2B company with strong receivables or an equipment-intensive company may present a different financing profile from a business with few tangible or financeable assets.

What Should a Buyer Prepare?

Prepare the purchase price, requested financing amount, target-company financials, accounts receivable information, inventory records, equipment schedules, existing business debt and the expected use of funds.

The borrower should also know the current personal credit profile, business revenue, banking relationship and ownership structure. These details help a funding provider understand the complete transaction rather than only the collateral.

If your acquisition involves meaningful receivables, inventory or equipment and you are looking for financing, submit the core deal information through EIN Business Funding for an initial funding review.

FAQs

What is asset-based lending for a business acquisition?
Asset-based lending is financing in which qualifying business assets can play an important role in the lender’s underwriting and borrowing structure.

What business assets may be relevant to ABL?
Depending on the lender and transaction, qualifying accounts receivable, inventory, equipment or other eligible business assets may be considered.

Does having business assets guarantee acquisition financing?
No. Lenders may also evaluate the borrower, cash flow, existing debt, industry, asset quality and the overall acquisition transaction.