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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Asset-based lending (ABL)

What is asset-based lending, and how does it differ from cash-flow lending?

ONE OF 416 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Asset-based lending is finance sized and controlled by the realisable value of specific assets, usually receivables and stock and sometimes plant or property, rather than by a multiple of earnings. The limit moves with a borrowing base recalculated from regular certificates, the lender tests the collateral through field exams and often controls collections, and financial covenants are usually lighter than in cash-flow lending. It is often used by businesses with seasonal, thin or recovering earnings but a good-quality ledger and stock, and is offered both by banks' specialist teams and by independent financiers.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// THE FULL PAGE

Asset-Based Lending: a Worked Example →

Lend against what the ledger will collect, not what the year earned.

// WHAT IT IS NOT

A borrowing base is the formula that sets a limit from eligible assets; asset-based lending is the whole category of finance built on that formula, with the monitoring and cash control that come with it.

// WORKED IN

// NEXT TO IT

RECEIVABLES AND TRADE

All 416 terms on one page