How Growing Companies Can Use Asset-Based Lending to Scale Smarter
Written By
Andrew Hawking
Raising capital to fund business growth has become more challenging in recent years. Higher interest rates and tighter credit conditions have made it harder for many companies to secure financing. In response, businesses are exploring more flexible funding options.
Asset-based lending (ABL) is gaining momentum as businesses seek alternatives to traditional loans and equity financing. With the global ABL market expected to grow at an annual rate of 11% and potentially surpass $1.5 trillion by 2032, more companies are leveraging their receivables and physical assets to generate liquidity. This approach enables them to fund growth and pursue new opportunities without sacrificing ownership or taking on costly debt.
What Is Asset-Based Lending?
Asset-based lending (sometimes referred to more broadly as asset-based financing) is a form of financing secured by the assets on a company’s balance sheet.
These might include:
- Accounts receivable
- Inventory
- Equipment
- Real Estate
- Intellectual Property
Lenders evaluate the value of these assets and offer a working capital line of credit or term loan based on that figure. Unlike traditional financing, which often hinges on a company’s profitability and earnings history, ABL focuses on the strength of the business’s assets.
This allows business owners to access capital, helping them pursue growth opportunities even when traditional financing is harder to secure.
Why ABL Is a Smart Fit for Growing Businesses
ABL converts receivables or inventory into liquidity, scaling with growth initiatives such as:
- Securing new contracts
- Rolling out new products
- Leveraging inventory financing to negotiate better trade terms
These types of initiatives often require additional funding to move forward, and ABL provides a way to unlock it. As a company builds its asset base, it can typically access greater amounts of capital through asset-based lending. This flexible form of capital financing supports continued expansion.
ABL also moves faster than many traditional loan options, helping businesses avoid lengthy approval processes and restrictive terms that can slow growth.
ABL in Action
Here’s an example of how a scaling business might use ABL to support expansion:
Consider a manufacturer facing rising demand from both existing and new clients. The company has a healthy portfolio of accounts receivable and strong inventory but limited cash flow to take on a new large client.
By choosing asset-based lending and using its accounts receivable and inventory as collateral, the manufacturer gains access to working capital that can be used to support growth.
This funding enables the business to invest in the materials and labor required for larger projects, fueling revenue growth.
How Lenders Evaluate ABL Opportunities
When evaluating asset-based lending opportunities, lenders focus first on the quality of the available collateral. They look for receivables that are earned, reliable and collectible, along with inventory consisting of raw materials and finished goods with clear market value. In other words, the more verifiable the assets, the more borrowing power the company can typically secure.
Lenders also assess a company’s ability to manage and report on its assets. That’s why businesses with dependable reporting systems and operational controls are better positioned to secure attractive terms.
In addition, lenders tend to look closely at the management team. After all, a leadership group with a clear plan for using ABL to support profitable growth is more likely to build lender confidence.
How to Use Asset-Based Lending to Grow Your Business
Maintaining up-to-date records of your assets is one of the first steps in preparing to apply for asset-based lending. Accurate documentation gives lenders a clearer picture of your available collateral, which, in turn, strengthens your position when seeking funding or pursuing new business opportunities.
It’s also wise to work with a lending partner with experience structuring flexible solutions, such as ABL financing. This expertise allows the lender to adapt financing solutions as your business evolves. Banc of California, for example, offers sector-specific options tailored to companies in manufacturing, distribution, staffing, transportation and more.
After securing funding, it’s worth approaching ABL with a clear growth strategy. Prioritizing uses such as capacity expansion or operational improvements (rather than routine expenses) signals to lenders that your business is focused on building lasting value. Over time, this kind of disciplined approach helps cultivate stronger financial relationships.
At the same time, ABL should fit thoughtfully into your broader capital strategy. Many companies use asset-based lending as a bridge to longer-term financing, such as permanent capital, an IPO or an acquisition. Defining this role early and deploying funds toward sustainable growth, rather than covering ongoing losses or routine shortfalls, helps maintain stronger financial partnerships while supporting your business’s long-term health.
Fuel Growth Without Giving Up Control
Asset-based lending provides growth financing for businesses by turning receivables or other assets into working capital. This helps corporations expand and serves as a flexible component of your broader capital strategy, particularly during periods of growth.
If your business is ready to scale, now may be the right time to explore how asset-based lending can support that strategy. Learn more about how Banc of California can help you leverage assets to grow your business.
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