What is Asset-Backed Lending? A Founder’s Guide to Capital
Asset-backed lending offers flexible capital secured by what your business owns.
Asset-backed lending (ABL) is a form of debt financing where a business secures a loan using its tangible or financial assets — like accounts receivable, inventory, or equipment. Unlike cash flow lending or venture debt, this option relies less on future earnings or investor backing and more on the value of your existing assets.
In capital-intensive industries or uncertain markets, ABL can offer reliable access to working capital without diluting ownership or relying solely on profitability.
How Asset-Backed Lending Works
In an asset-backed loan, the lender issues capital based on the appraised value of a company’s assets. Commonly pledged assets include:
- Accounts receivable
- Inventory
- Machinery and equipment
- Real estate
- Intellectual property (in some cases)
The structure can take the form of a term loan or a revolving credit facility, where your borrowing base fluctuates with the value of the collateral. If the business defaults, the lender has the right to seize and sell the pledged assets to recover the loan.
Think of it as unlocking the value that’s already sitting on your balance sheet.
How It Compares to Other Financing Options
Asset-backed lending is often used as an alternative to — or in conjunction with — other non-dilutive solutions.
- Versus cash flow lending: ABL focuses on assets, not profitability or revenue consistency.
- Versus venture debt: No VC backing required; approval depends on asset quality, not your cap table.
- Versus revenue-based financing: Payments aren’t tied to revenue — they follow traditional loan terms.
ABL is especially common in manufacturing, logistics, and B2B businesses with substantial receivables or physical infrastructure.
Why Founders Choose This Path
Non-dilutive: You raise capital without giving up equity or control.
Higher approval odds: Lenders are more comfortable lending against tangible assets.
Flexible structures: Revolvers, lines of credit, or term loans based on your needs.
Working capital support: Often used to bridge cash gaps during inventory cycles or sales lag.
Is Asset-Backed Lending Right for You?
ABL works best for companies with meaningful assets on the balance sheet, especially those looking to fund operations, cover short-term liquidity needs, or avoid dilution. It may not be ideal for early-stage or asset-light businesses like software startups.
Hum Capital helps founders identify the right financing strategy for their business model — and match them with capital partners who understand their growth goals. If you have untapped value in your receivables, inventory, or infrastructure, asset-backed lending may be a smart path forward.
Discover how much you could raise through Hum’s Intelligent Marketplace here.
