Published and reviewed 1 November 2026. General information, not advice. Figures are illustrations, not lender quotes.
The short version
- Asset-based lending (ABL) is one secured facility that lends against several kinds of business asset at once: unpaid invoices, stock, plant and machinery, and sometimes property. Invoices and stock usually sit in a revolving line that rises and falls with their value. Plant and property usually become term loans.
- Each asset lends a different share of its value. Published UK maximums run up to about 90% of eligible invoices, up to 85% of eligible stock or 90% of its liquidation value, 75% to 80% of the forced-sale value of plant, and about 75% of property value. Ineligible invoices and stock come out first, so the real figure is lower.
- In our worked example, a manufacturer with £2.4 million of debtors, £1.8 million of stock, plant and a freehold could borrow about £3.52 million, against about £1.6 million from invoice discounting alone. A 20% dip in debtors would cut its revolving availability by about £323,000.
- ABL is priced as interest over base rate plus fees: service, stock monitoring, arrangement, valuation and audit. On our illustrative assumptions, the first year costs about £320,900, or roughly 10% of the money drawn, and about £110,200 of that is fees.
- It suits companies with a meaningful debtor book and tangible assets, usually with turnover in the millions. Bank providers state minimums such as £6.5 million turnover or a £2 million facility. ABL can be backed by the Growth Guarantee Scheme up to £2 million. It is not regulated by the FCA, but most providers follow UK Finance’s standards framework.
What asset-based lending is
Asset-based lending, usually shortened to ABL, is a way for a company to borrow against the assets on its balance sheet rather than mainly against its profits. One lender takes security over several kinds of asset at once, values each one, and lends a set percentage of each value. The total of those percentages, less some deductions, is what the company can borrow. Lenders call that total the borrowing base or availability.
The idea is simple. A business that sells on credit, holds stock and owns machinery has a lot of value tied up in things a lender could sell if it had to. A normal bank loan is sized mainly on profit and cash flow, so a company with thin margins, a recent loss or a fast-growing order book can find that its assets are worth far more than a cash-flow lender will lend. ABL turns that value into a working facility.
The parts of an ABL facility
| Part | What it lends against | How it works |
|---|---|---|
| Invoice discounting line | Unpaid invoices owed by business customers | Revolving. Availability rises as you invoice and falls as customers pay. Almost always the core of the facility. |
| Stock or inventory line | Raw materials and finished goods that could be sold | Revolving. Availability moves with the stock reports you send the lender. |
| Plant and machinery loan | Equipment the business already owns | A term loan, typically repaid over up to five years. |
| Property loan | Commercial property the business owns | A term loan, often with a longer repayment profile than the facility term. |
| Cash flow loan | The business’s earnings rather than a specific asset | A smaller term loan some lenders add on top, usually limited to a multiple of earnings. |
Not every facility has every part. One rule is close to universal, though: the debtor book comes first. Metro Bank states that every ABL facility it provides must include an invoice finance element, and Skipton Business Finance requires receivables to make up at least 51% of the facility structure. If your business does not sell on credit to other businesses, ABL is unlikely to be the right tool, and our guide to business loans secured against property or asset finance may fit better.
ABL, invoice finance and asset finance: what is the difference?
The names overlap, which causes confusion. Invoice finance lends against invoices alone. Asset finance usually pays for a new piece of equipment, with the equipment as security, through hire purchase or leasing. Asset-based lending wraps invoices, stock, existing plant and sometimes property into one facility with one lender, one set of security documents and one borrowing base. You will also see it called asset-backed lending or asset-based finance. Some lenders use “asset-backed loan” for a simple loan secured on a single asset, so check what is actually on offer.
How an ABL facility works, day to day
An ABL facility behaves less like a loan and more like a bank account with a limit that changes every week. The steps below are how most UK facilities run once they are in place.
- The lender values each asset class. Before the facility starts, independent valuers value stock, plant and property, and the lender’s own team audits the debtor ledger. These values set the starting borrowing base.
- You report regularly. You upload sales invoices as you raise them, usually daily or weekly, plus an aged debtor list and a stock report, usually monthly. Each report updates availability.
- Customers pay into an account the lender controls. Invoice payments go to a collection or trust account. The lender uses them to reduce what you owe, and you can draw again up to your availability.
- You draw what you need. You can draw any amount up to the availability figure, and interest is charged daily only on what is drawn. Term loans for plant and property are drawn once and repaid monthly.
- The lender checks the numbers. Field auditors visit, often quarterly, to test that invoices are genuine, that customers are paying and that stock is where you say it is. Stock and plant are revalued from time to time, usually at your cost.
- The facility is reviewed and renewed. Agreements commonly run for one to five years. Metro Bank’s product summary gives one to five years, with renewal subject to credit review.
The big practical difference from a term loan is that your borrowing power moves with trading. When sales grow, debtors and stock grow, and so does availability. That is why ABL is popular with growing and seasonal businesses. The flip side is covered in the worked example: when sales fall, availability falls with them, often at exactly the moment you need cash most.
Which assets count, and how much each one lends
Each asset class has its own advance rate: the percentage of its value the lender will lend. The rates differ because some assets are easier to turn into cash than others. A lender can collect an invoice from a creditworthy customer in weeks. Selling a half-built product or a specialist machine is slower, less certain and more expensive.
| Asset | Typical maximum advance | Valued on | Usually structured as |
|---|---|---|---|
| Unpaid invoices (debtors) | Up to 90% of eligible invoices | The face value of invoices, after ineligible ones are removed | Revolving line |
| Stock (inventory) | Up to 85% of eligible stock value, or up to 90% of its net orderly liquidation value | What the stock would fetch in an orderly sale, often a fraction of cost | Revolving line |
| Plant and machinery | Up to 75% to 80% | A forced-sale value, such as a 120-day sale with the kit removed from site | Term loan of up to 5 years |
| Commercial property | Up to about 75% | Market value from a RICS valuation | Term loan, with amortisation of up to 20 or 25 years |
| Cash flow loan | Up to about 1.5 times EBITDA at one lender | Earnings rather than an asset | Term loan, often up to 3 or 4 years |
Sources: Metro Bank publishes maximums of 90% on debtors, 85% on eligible stock, 80% on plant and machinery over three to five years, and 75% on commercial property over up to 25 years. Skipton Business Finance publishes up to 90% on receivables, up to 90% of the net orderly liquidation value of stock, up to 75% on plant based on a 120-day ex-situ valuation over a maximum five-year term, up to 75% on property, and cash flow loans of up to £2 million or 1.5 times EBITDA over up to 36 months. These are ceilings, not what most businesses get.
Why the value matters as much as the percentage
The advance rate is applied to a cautious value, not the figure in your accounts. Three examples show how far apart they can be.
- Stock is valued at its net orderly liquidation value (NOLV): what a professional could sell it for over a few months, after the costs of selling. For finished, branded goods that might be well over half of cost. For work in progress, perishable or made-to-order items it can be close to nothing.
- Plant and machinery is often valued ex situ, meaning removed from your premises and sold, sometimes within a fixed period such as 120 days. A machine on your balance sheet at £100,000 might have a forced-sale value of £40,000.
- Invoices lend on face value, but only the eligible ones. The next section shows how much that can remove.
Ineligible invoices and stock
Before any percentage is applied, the lender strips out assets it does not trust. The common exclusions are below. Ask each lender for its list in writing, because it changes the answer more than the headline rate does.
| Exclusion | Why lenders exclude it |
|---|---|
| Invoices more than 90 or 120 days old | Old debts are less likely to be paid. |
| Concentration above a set limit | If one customer owes, say, more than 25% of the ledger, the excess is excluded or advanced at a lower rate. |
| Related-party and group invoices | Money owed by a connected company is not a true third-party debt. |
| Contra accounts | Where you also owe the customer money, it may set one off against the other. |
| Some overseas debtors | Collection is harder. Credit insurance can bring them back in. |
| Applications for payment and stage billing | Common in construction. The amount due is disputed more often, so many lenders exclude it. |
| Stock subject to retention of title | If a supplier has not been paid and its terms keep ownership until it is, the lender cannot rely on that stock. |
| Work in progress, obsolete or slow-moving stock | Hard to sell to anyone else at a sensible price. |
Worked example: building a borrowing base
This example shows how the advance rates, exclusions and deductions turn a balance sheet into a borrowing figure. The company and every figure are illustrations, not a lender’s offer.
Worked example: a manufacturer with £12 million turnover
The company sells to trade customers on 60-day terms. On the day of the calculation it has £2.4 million of unpaid invoices, £1.8 million of stock at cost, machinery with a forced-sale value of £600,000 and a freehold factory valued at £1.2 million. It owes HMRC nothing overdue, but the lender holds back a reserve for the VAT and PAYE that would rank ahead of it in an insolvency. The advance rates are assumptions within the published ranges.
| Line | Amount | How it is worked out |
|---|---|---|
| Debtor ledger | £2,400,000 | All unpaid invoices |
| Less ineligible invoices | −£500,000 | Over 90 days £180,000, related party £60,000, uninsured overseas £100,000, one customer above the concentration limit £110,000, contra £50,000 |
| Debtor availability | £1,615,000 | 85% of £1,900,000 eligible invoices |
| Stock availability | £765,000 | £1.5 million eligible stock after removing work in progress and slow lines, valued at 60% of cost (£900,000 NOLV), advanced at 85% |
| Plant and machinery loan | £450,000 | 75% of the £600,000 forced-sale value |
| Property loan | £840,000 | 70% of the £1.2 million market value |
| Less reserve | −£150,000 | Held back for preferential HMRC debts |
| Total facility | £3,520,000 | Of which £2,230,000 is the revolving line and £1,290,000 the term loans |
For comparison, an invoice discounting facility on the same ledger would offer about £1,615,000. Adding stock, plant and property roughly doubles what the company can borrow, without a separate lender for each.
What happens when trade slows
Now suppose a quiet month cuts eligible debtors by 20%, from £1.9 million to £1.52 million. At 85%, debtor availability falls by about £323,000, to £1,292,000. Revolving availability falls from £2,230,000 to about £1,907,000. If the company had drawn £1.9 million, its headroom would shrink from about £330,000 to about £7,000.
That is the most important thing to understand about ABL. It does not lend you more when you are struggling. It lends against what you have, and what you have shrinks when sales fall, customers pay late or stock is written down. Keep headroom, and model a bad month before you sign. Our guide to working capital finance shows how to size your cash gap first.
Lenders’ caps and blocks
Two further adjustments are common. Many lenders cap stock lending, for example as a fixed sum or as a share of total availability, so stock cannot dominate the facility. And some impose an availability block: an amount you must always leave undrawn, which works like a minimum headroom covenant. Ask for both in the indicative terms.
Who asset-based lending suits
ABL works best for companies whose balance sheet is stronger than their recent profit, or whose borrowing needs move with sales. The common cases are:
- Manufacturers, wholesalers and distributors with a sizeable debtor book and stock that other businesses would buy.
- Growing companies whose orders have outrun their overdraft. As sales rise, availability rises automatically, without renegotiating a loan.
- Seasonal businesses that build stock for a peak and collect cash afterwards.
- Acquisitions and buyouts. ABL is often used to fund part of the price of a company by lending against the target’s assets. Metro Bank lists management buy-outs, buy-ins and acquisitions among its uses. Our guide to business acquisition finance covers the full funding stack.
- Refinancing and turnarounds. A company with a recent loss but good assets can sometimes refinance a bank overdraft or loans onto ABL, because the lender relies more on the assets and less on past profit.
How big does the business need to be?
ABL has fixed costs for valuations, audits and monitoring, so providers set minimums. Published examples include a minimum turnover of £6.5 million at NatWest Group’s RBS, a minimum facility of £2 million and a maximum of £50 million at Metro Bank, and facilities typically from £3 million to £25 million at Skipton Business Finance. Some specialist lenders go lower, into facilities of a few hundred thousand pounds, often combining invoice finance with a stock or plant loan.
When ABL is probably the wrong tool
- You sell mainly to consumers, so there is little or no debtor book.
- Most of your invoices are applications for payment or stage payments on contracts.
- Your stock is bespoke, perishable or mostly work in progress.
- Your turnover is under about £1 million and a simple invoice finance facility or a business loan would do the job at lower running cost.
- You cannot produce accurate monthly debtor and stock reports. ABL depends on them.
What asset-based lending costs
ABL lenders rarely publish a price list. Most quote case by case. The structure of the price is well established, though, and Metro Bank’s important information summary sets out a typical one. Interest is variable, charged daily on what you have drawn, at a margin over the lender’s base rate. On top come several fees.
| Charge | How it is set | What to ask |
|---|---|---|
| Discount charge or interest | A variable margin over base rate, charged daily on the drawn balance of each line. Term loans have their own margin. | The margin on each line, the base rate it tracks and whether there is a minimum rate. |
| Service fee | Either a percentage of invoiced sales, including VAT, or a fixed monthly fee. | Which basis, and the minimum annual service fee. |
| Stock monitoring fee | Often a fixed monthly fee. | Whether it rises if stock reporting is late. |
| Arrangement fee | Negotiated, often a percentage of the facility. | Whether it is charged again on renewal or on an increase. |
| Annual or renewal fee | Negotiated. | The amount in pounds each year. |
| Valuation fees | Paid by you, for the first valuations and later ones. | How often revaluations are required and roughly what they cost. |
| Audit fees | Charged per field audit visit, or included in the service fee. | How many audits a year and the charge per day. |
| Non-utilisation fee | Sometimes charged on the undrawn part of the facility. | Whether it applies and at what rate. |
| Termination fee | Charged if you leave before the end of the minimum term or without enough notice. | The fee in pounds at each point in the term, and the notice period. |
Bank Rate is 3.75%, and the Bank of England’s next decision is due on 5 November 2026. A lender’s own base rate may differ from Bank Rate, so check which one the margin is added to.
Worked example: the first year of the £3.52 million facility
These are assumptions for the illustration, not quotes. The company draws an average of £1.9 million on the revolving line at 2.75% over a 3.75% base rate (6.5%), and takes both term loans at 3.25% over base (7.0%), repaid monthly: plant over five years and property over twenty.
| Item | Year one | How it is worked out |
|---|---|---|
| Interest on the revolving line | £123,500 | 6.5% on an average £1.9 million drawn |
| Interest on the term loans | £87,200 | 7.0% on £450,000 and £840,000, falling as they are repaid |
| Service fee | £36,000 | Assumed fixed fee of £3,000 a month |
| Stock monitoring fee | £15,000 | Assumed £1,250 a month |
| Arrangement fee | £35,200 | Assumed 1% of £3.52 million, one-off |
| Initial valuations | £18,000 | Assumed allowance for stock, plant and property |
| Field audits | £6,000 | Assumed four visits at £1,500 |
| Total | £320,900 | About 10% of the roughly £3.1 million drawn on average |
About £110,200 of the first year is fees, and £53,200 of that is one-off. In the second year, with no arrangement fee and lighter revaluations, the cost falls, but the fixed fees stay whether or not you draw. A facility that is set up and then barely used can be expensive for what it does.
The lesson is to compare offers on the total cost in pounds for the way you will actually use the facility, not on the margin. A low margin with a high minimum service fee can cost more than a higher margin with modest fees. The invoice finance calculator helps price the debtor line, and our guide to business loan interest rates explains how margins over base rate work.
ABL compared with other kinds of business finance
ABL sits between invoice finance and a traditional secured bank facility. The table compares the routes a company of this size is most likely to weigh.
| Finance | Sized on | Flexes with trading? | Main trade-off |
|---|---|---|---|
| Asset-based lending | The value of invoices, stock, plant and property together | Yes, the revolving part | More borrowing power, but more reporting, audits and fees. |
| Invoice discounting | Invoices only | Yes | Simpler and cheaper to run, but lends against one asset. |
| Overdraft or revolving credit facility | Mainly profit and cash flow | No, a fixed limit | Little reporting, but the limit may be small or withdrawn on review. |
| Secured term loan | Profit, with property or a debenture as security | No | Predictable repayments, but no extra headroom as sales grow. |
| Asset finance or asset refinance | A single asset | No | Good for one machine or fleet. Each agreement stands alone. |
| Bridging loan | Property value | No | Fast, but expensive and short. |
Overdraft use is high at the moment. UK Finance’s Business Finance Review for the second quarter of 2026 reported that small businesses were using 51.4% of their overdraft limits, the highest since March 2020. A company that keeps hitting its overdraft limit while its debtors and stock grow is a classic candidate for moving onto ABL.
Our guide to commercial loans compares every main type of business borrowing, and secured vs unsecured business loans explains how security changes the price and the risk.
What ABL lenders look at before they lend
ABL due diligence is more thorough than for a typical loan, because the lender is relying on the assets being real, collectable and saleable. Expect the following.
- An aged debtor list and aged creditor list, showing who owes you what and for how long, and who you owe.
- The latest filed accounts and recent management accounts, plus forecasts. Lenders often ask for a 13-week cash flow forecast and a 12-month profit and loss forecast.
- A stock listing by line, location and age, and details of any supplier terms with retention of title.
- A fixed asset register for plant and machinery, with any existing finance against it.
- Professional valuations of stock, plant and property, usually commissioned after indicative terms are agreed and paid for by you.
- A pre-lending audit, often called a survey or field examination. Auditors test a sample of invoices against delivery notes and customer records, look at credit notes and disputes, and check that the ledger matches the accounts.
- HMRC position. Any arrears of VAT or PAYE, and any time to pay arrangement. These affect the reserve the lender holds back.
- Existing lenders and security. Who has charges over the company’s assets now, and whether they will release them or agree to share.
- The people. Lenders want a finance function that can report accurately and on time. A late or wrong borrowing base report is one of the fastest ways to lose a lender’s trust.
Our guide to how to get a business loan covers the general credit checks, and the borrowing checklist is a quick way to organise the documents.
Covenants, reporting and audits
ABL agreements are often described as covenant-light, because the borrowing base itself does much of the work that financial covenants do in a bank loan. Light is not the same as none. Read every condition in the facility letter.
Common conditions
- Reporting deadlines. Sales ledger uploads, monthly aged debtors, stock reports and management accounts by set dates. Missing a deadline can freeze availability.
- Minimum availability or headroom. An amount you must keep undrawn.
- Springing covenants. A financial test, such as fixed-charge cover, that only applies if headroom falls below a trigger level.
- Dilution. If credit notes, discounts and bad debts reduce what customers actually pay by more than an agreed share, the lender may lower the advance rate.
- Limits on other borrowing and on dividends, and restrictions on selling assets the lender relies on.
- Change of control. Selling the company or changing major shareholders usually needs consent.
When a covenant is breached
A breach usually lets the lender reduce advance rates, add reserves, charge a higher margin or, in the end, demand repayment. In practice most lenders talk first, and many breaches end in a waiver with a fee. The best protection is to tell the lender early. A surprise found in a field audit damages the relationship far more than a problem you raise yourself.
Security, guarantees and insolvency
ABL is secured lending. The lender takes a debenture over the company: fixed charges over specific assets such as property, plant and the debts, and a floating charge over everything else, including stock. The charges must be registered at Companies House within 21 days. Invoices are usually assigned to the lender outright, which is why customers pay into its account.
Personal guarantees
Many ABL facilities carry a personal guarantee from the directors, often for a capped amount. Some lenders ask instead for a warranty and indemnity, which makes the director liable if the debts or stock turn out not to be what was reported, such as a fake invoice. That sounds narrower than a full guarantee, and it is, but read the wording carefully with a solicitor. In a group, each company usually guarantees the others.
What happens if the company fails
Insolvency law decides who gets paid first, and it affects how much an ABL lender will lend in the first place. Since 1 December 2020, HMRC ranks ahead of floating charge holders for VAT and taxes deducted from employees, such as PAYE and employee National Insurance. And an insolvency practitioner must set aside a share of floating charge realisations for unsecured creditors, called the prescribed part, of up to £800,000. Both reduce what a lender can recover from stock and other floating charge assets, which is why lenders hold reserves and why stock advance rates are cautious.
If repayments stop or the borrowing base falls short, the lender can stop new drawings, collect the invoices directly from your customers, and ultimately appoint an administrator or sell the assets it holds security over. Our guide to secured vs unsecured business loans explains what happens when a secured loan goes wrong.
How to arrange an ABL facility, step by step
- Work out what you need and why. Working capital, growth, an acquisition or refinancing existing debt. Model your peak and your quietest month.
- Estimate your own borrowing base. Use the method in the worked example on your latest aged debtors, stock list and asset register. Be harsh about exclusions.
- Get your reporting in order. Clean the sales ledger, resolve old disputes and credit notes, and make sure stock records match the accounts.
- Approach two or three lenders, or a specialist broker. Banks, specialist ABL lenders and invoice finance companies all offer ABL. Ask each for indicative terms covering every line, every fee and the exclusions.
- Compare the offers in pounds. Price each on your realistic drawing pattern, as in the cost example, including the minimum fees and the cost to leave.
- Valuations and audit. Once you choose a lender, it instructs valuers and auditors. Their findings can change the borrowing base, so expect some movement from the indicative terms.
- Credit approval and legal documents. The facility letter, debenture, guarantees and any agreements with existing lenders. Have a solicitor review them.
- Switch over. Notify customers of the new payment details, transfer existing facilities and set up the reporting systems.
A new ABL facility usually takes weeks rather than days, because valuations, audits and legal work run in sequence. Refinancing an existing lender can take longer if security has to be released. Ask each lender for a timetable at the start.
Leaving an ABL facility
Agreements set a minimum term and a notice period, and leaving early can cost a termination fee. Plan any move to another lender, or back to a simpler facility, well before the renewal date, and ask for the exit cost in pounds before you sign the first agreement.
ABL and the Growth Guarantee Scheme
Asset-based lending is one of the facility types covered by the Growth Guarantee Scheme. Businesses with turnover of up to £45 million can use it for facilities of up to £2 million per business group, through accredited lenders, for terms of up to three years. The government announced in July 2026 that the turnover limit will rise to £54 million, and lenders are bringing that in one by one. Skipton Business Finance, for example, states that it is accredited. The government guarantee covers 70% of the lender’s loss, not yours: the company still owes the whole amount, and directors can still be asked for a personal guarantee.
The scheme can help where a lender would otherwise lend less, or would want more security than you can offer. Ask whether a lender would consider it, but you cannot insist. Our Growth Guarantee Scheme guide covers eligibility, the 2026 changes and costs.
Is asset-based lending regulated?
Lending to a limited company is generally outside the Financial Conduct Authority’s consumer credit rules, and ABL is no exception. Protection comes from elsewhere.
- UK Finance’s standards. Members that provide invoice finance and ABL sign up to the Invoice Finance and Asset Based Lending Standards Framework, which includes a code of conduct and an independent complaints route through CEDR. UK Finance says its members provide well over £20 billion of invoice finance and ABL at any one time. Ask whether a provider is a member before you sign.
- The Financial Ombudsman Service can hear complaints from micro-enterprises and some small businesses, though many ABL clients are too large to qualify.
- Your contract. Outside those routes, the facility letter, debenture and guarantees are the deal. Take legal advice on anything you do not understand.
Common mistakes to avoid
- Treating the headline facility as spendable cash. Only availability is spendable, and it moves. Plan to use well under the maximum.
- Ignoring ineligibles. Old invoices, one big customer or construction applications for payment can remove a large slice of the debtor book.
- Comparing margins instead of total cost. Minimum fees, monitoring, audits and valuations add up, especially if the facility is lightly used.
- Letting reporting slip. Late reports freeze availability and damage trust.
- Forgetting the exit. Minimum terms and termination fees can make an ABL facility expensive to leave in a hurry.
- Signing a guarantee or indemnity unread. Know exactly what you are personally liable for, and whether it is capped.
Where Business Loan Advice fits
We are not a lender or a broker and we do not give personal advice. We are preparing a service that will introduce UK limited companies directly to lenders. No lenders are confirmed yet, so we cannot currently obtain quotes or make introductions. You will not pay us a fee. If a lender pays us commission after the service launches, we will tell you before asking your permission to refer you.
In the meantime, the invoice finance calculator, the asset finance calculator and these guides are free to use with no sign-up. If your limited company is planning to borrow, you can register its interest and we will contact you about the service launch. Read how we are paid for the details.
Common questions
What is asset-based lending?
Asset-based lending is a secured facility that lends against several business assets at once, usually unpaid invoices, stock, plant and machinery and sometimes property. Each asset lends a set percentage of its value, and the total, less deductions, is what the company can borrow.
How does asset-based lending work?
A lender values each asset class and applies an advance rate to each. Invoices and stock form a revolving line that moves with your regular reports. Plant and property usually become term loans. Customers pay into an account the lender controls, and you draw up to your availability.
How much can I borrow with asset-based lending?
It depends on your eligible assets. Published UK maximums are up to about 90% of eligible invoices, 85% of eligible stock, 75% to 80% of the forced-sale value of plant and 75% of property value. Ineligible invoices and stock are removed first, so the real figure is lower.
What is a borrowing base?
The borrowing base is the amount you can draw at any time. It is the eligible value of each asset multiplied by its advance rate, added together, less reserves and any availability block. It changes every time you report new invoices, payments or stock.
How much does asset-based lending cost?
Interest is a variable margin over base rate, charged daily on what you draw, plus fees for service, stock monitoring, arrangement, valuations and audits. In our illustration, a £3.52 million facility cost about £320,900 in its first year, roughly 10% of the money drawn.
What is the minimum turnover for asset-based lending?
It varies by lender. NatWest Group’s RBS states a minimum turnover of £6.5 million, Metro Bank a minimum facility of £2 million and Skipton Business Finance facilities typically from £3 million. Some specialist lenders offer smaller facilities, often from a few hundred thousand pounds.
What is the difference between asset-based lending and invoice finance?
Invoice finance lends against unpaid invoices only. Asset-based lending adds stock, plant and machinery and sometimes property to the same facility, so a company with substantial assets can usually borrow more from one lender. ABL normally includes an invoice finance line at its core.
What is the difference between asset-based lending and asset finance?
Asset finance usually pays for a specific new asset through hire purchase or leasing, with that asset as security. Asset-based lending borrows against assets the company already owns, across several asset classes, in one facility with one borrowing base.
Is asset-based lending a good idea?
It can be for a company with a strong debtor book and saleable assets whose borrowing needs move with sales. It is less suitable for consumer-facing businesses, contract businesses that bill by application for payment, or small companies where the fixed fees outweigh the extra borrowing.
Do I need a personal guarantee for asset-based lending?
Often, though it may be capped. Some lenders ask for a warranty and indemnity instead, which makes directors liable if invoices or stock turn out to be misreported. Read the wording with a solicitor before you sign.
Can asset-based lending be used to buy a business?
Yes. ABL is often used to fund part of the price of an acquisition or management buyout by lending against the target company’s invoices, stock and other assets. Lenders will look at the combined business and the cash left after the deal.
Is asset-based lending covered by the Growth Guarantee Scheme?
Yes. Asset-based lending is one of the facility types the scheme covers, for businesses with turnover up to £45 million and facilities up to £2 million per group, through accredited lenders. The guarantee protects the lender, and the business still owes the full amount.
How long does it take to set up an ABL facility?
Usually weeks rather than days. Valuations of stock, plant and property, a pre-lending audit of the debtor ledger and the legal documents all have to be completed. Refinancing an existing lender can take longer if its security has to be released.
Metro Bank: asset based lending, advance rates and documents, checked 1 November 2026
Metro Bank: asset based lending important information summary, fees and terms
RBS (NatWest Group): asset based lending, minimum turnover
UK Finance: invoice finance and asset-based lending
UK Finance: Invoice Finance and Asset Based Lending Standards Framework
CEDR: invoice finance and asset based lending complaints scheme
UK Finance: Business Finance Review, 2026 Q2, published 21 September 2026
GOV.UK: Growth Guarantee Scheme
Bank of England: Monetary Policy Summary, September 2026, Bank Rate held at 3.75%
Bank of England: upcoming Monetary Policy Committee dates
Legislation.gov.uk: Companies Act 2006, section 859A, registering charges
Legislation.gov.uk: Finance Act 2020, section 98, HMRC debts in insolvency
Legislation.gov.uk: Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020
Financial Ombudsman Service: which small businesses we can help
Rates, tax bands and lender criteria change. Confirm the current details with the lender, your solicitor or your accountant before relying on them.