An asset-based loan works as a revolving line or term loan whose size depends on the value of a company's receivables and inventory, or of its equipment and real estate, rather than on cash flow alone. For facilities between $100,000 and $150 million, Rainstar Capital Group shops these requests to 20-plus ABL lenders, covering growth plans, turnarounds and debtor-in-possession cases.

Rainstar Capital Group runs its debt advisory practice from Grand Rapids, Michigan, and its platform counts over 250 registered lenders. Its middle-market team includes commercial bankers and former bank presidents who arrange ABL facilities with banks, private credit funds and non-bank ABL lenders.

All financing on this page is subject to lender approval, underwriting, documentation and program terms. On each transaction, Rainstar Capital Group acts as a commercial financing intermediary, not the direct lender.

Asset-Based Lending in Brief

Samples from Rainstar's lender network:

• Loan size: $100,000 up to $150 million.

• Structures: revolving credit lines, stretch senior loans, term loans and factoring.

• Credit score: on the platform, most ABL lenders set no minimum.

• Revenue: minimums between roughly $100,000 a year and $25 million, depending on the lender.

• Sample pricing: roughly 5% to 30% annually, or 0.5% to 2% monthly on factoring-style facilities.

• Medical receivables: advance rates as high as 85%.

• Inventory: one lender advances up to 70% of cost or 75% of net orderly liquidation value.

• Special situations: turnarounds, distressed borrowers and DIP financing.

These figures come from current lender programs and are not offers. Actual terms depend on underwriting, the lender and collateral quality.

Defining the Asset-Based Loan

An asset-based loan, or ABL, is business credit secured by assets on the borrower's balance sheet. Borrowing capacity follows the worth of eligible collateral. A business with a solid receivables book or plenty of stock can therefore often raise more under ABL than with a loan sized on earnings.

The majority of ABL facilities take the form of revolving lines: the company draws cash when needed, pays the balance down as customers settle invoices, then draws again. Some are instead term loans against real estate or equipment, and some blend the two.

Asset-Based or Asset-Backed?

In everyday use the phrases are often swapped. Strictly, an asset-based loan usually means direct credit to a company, backed by assets it owns, whereas asset-backed more often applies to securities built on pools of loans.

The Mechanics of Asset-Based Lending

Calculating the Borrowing Base

The borrowing base is the sum a company may draw at any moment. The lender multiplies each class of eligible collateral by its advance rate and totals the figures, so rising receivables and inventory lift the base.

Advance Rates by Asset Class

The advance rate is the share of collateral value a lender funds. The richest rates typically go to invoices owed by customers with good credit, commonly around 80% to 90%. Advances on inventory are usually lower, with 50% to 75% of the cost or liquidation value being common. Equipment and real estate, being slower to sell, typically get lower advance rates.

A hypothetical borrowing base:

• Eligible accounts receivable: $2,000,000 at 85%, or $1,700,000

• Eligible inventory: $1,000,000 at 50%, or $500,000

• Machinery and equipment: $800,000 at 40%, or $320,000

• Total borrowing base: $2,520,000

The figures are illustrative only and do not represent a Rainstar or lender offer.

Revolver or Term Loan?

A revolver covers working capital needs that swell and shrink as sales move. A term loan is one fixed sum, frequently secured by equipment or real estate and paid back on a set schedule. Plenty of facilities pair the two.

Reporting, Exams and Appraisals

ABL lenders watch collateral closely. Borrowers should plan on weekly or monthly borrowing-base certificates, agings of receivables and payables, inventory reports and periodic on-site field exams of the books and collateral. Equipment and inventory may be appraised as well.

Which Collateral Asset-Based Lenders Accept

• Accounts receivable: invoices that business or government customers owe, usually the strongest form of collateral.

• Inventory: raw materials and finished goods; work-in-process rarely qualifies.

• Machinery and equipment: appraised on an orderly-liquidation or forced-liquidation basis.

• Commercial real estate: an owner-occupied building can back a term portion.

• Purchase orders and contracts: funded through purchase order financing or contract financing.

• Government and medical receivables: handled by specialist lenders on Rainstar's platform.

Collateral Lenders Usually Exclude

Lenders leave out receivables older than about 90 days, balances owed by related companies, uninsured foreign receivables, heavy exposure to a single customer, and obsolete or slow-moving inventory. Because what a company owns can far exceed its eligible collateral, Rainstar reviews eligibility with the borrower before any lender sees the file.

Asset-Based Lending vs. Cash-Flow Lending and Invoice Factoring

Compared on basis, structure, covenants, fit and size:

• Asset-based loan: sized on collateral; revolver, term loan or both; fewer covenants, mostly collateral-based; fits growing or asset-heavy firms and those with uneven cash flow; up to $150 million on Rainstar's platform.

• Cash-flow (bank) loan: sized on earnings (EBITDA) and credit; term loan or line; more financial covenants; fits steady, profitable companies; size varies.

• Invoice factoring: sized on specific invoices; a sale of invoices; few covenants; fits small B2B firms and fast-growing ones; up to $20 million on Rainstar's platform.

ABL Financing Structures

The ABL Line of Credit

The central ABL product: a line that follows the borrowing base and funds day-to-day working capital.

Asset-Based Term Loans Against Fixed Assets

A fixed amount secured by equipment or real estate, frequently set up next to a revolver.

Stretch Senior Loan Structures

One senior loan that reaches past the collateral value, relying partly on cash flow, so the borrower can skip a separate mezzanine loan. One bank on Rainstar's platform offers one-stop structures as well as stretch senior loans.

Inventory Financing for Stock-Heavy Businesses

A line backed mostly by inventory, useful to distributors, wholesalers and retailers stocking up before sales arrive.

Accounts Receivable Financing Versus Selling Invoices

Invoices back the funding, through a credit line or a sale to a factor; see this site's accounts receivable financing guide.

Debtor-in-Possession Financing in Chapter 11

Debtor-in-possession financing funds companies that operate in Chapter 11. Rainstar put together $2.5 million of post-petition DIP funding for an e-commerce company through an AR factoring line.

Who Asset-Based Lending Suits

ABL suits businesses holding sizable receivables or inventory once they need more than a bank will advance against earnings alone. Manufacturers are frequent borrowers, as are wholesalers and distributors, staffing agencies, healthcare providers, government contractors, consumer-products makers, and transportation and logistics businesses.

When a Bank Declines or Wants Out

Companies that break a covenant, report a loss or grow beyond what their bank wants to hold are often sent to the bank's workout group or pressed to refinance. Because it lends against collateral and not the previous 12 months of earnings, an ABL lender can take out the bank.

Turnaround Financing for Distressed Companies

Several lenders on Rainstar's platform work with distressed companies, restructurings and businesses in Chapter 11 through DIP financing, provided the collateral is solid.

Stocking Up for Peak Season

An ABL revolver grows as a company stocks up for its peak season and shrinks as those sales are collected.

Rapid Growth

When sales outrun cash, a borrowing base tied to receivables lets working capital keep pace with revenue.

Funding Acquisitions and Recaps

Lenders in Rainstar's ABL network provide acquisition, recapitalization and M&A financing to private equity sponsors and to independent owners.

Kinds of Asset-Based Lending Companies

Rainstar's network includes these types of asset-based lending companies:

• Bank ABL divisions: the lowest pricing, but larger minimums and tighter reporting; a bank lender on Rainstar's platform favors deals between $3 million and $15 million.

• Non-bank ABL lenders: they cost more, but are more flexible about losses, credit and industry.

• Private credit funds: bigger, more complex facilities, among them acquisition financing of up to $150 million.

• Factoring companies: invoice-based funding for smaller and newer businesses.

• Specialty lenders: staffing, transportation, and healthcare or government receivables.

Asset-Based Loan Pricing and Fees

Collateral quality, deal size and risk set the price. Across Rainstar's platform, sample rates sit between roughly 5% and 30% annually, or 0.5% to 2% monthly for factoring-style facilities. Beyond interest, borrowers should allow for:

• Unused line fees charged on undrawn revolver balances

• Fees for field exams and appraisals

• Collateral monitoring charges

• Origination or closing fees, plus legal costs

• Early termination fees for refinancing before the term ends

ABL Covenant Terms

Compared with bank cash-flow loans, ABL agreements usually include fewer financial covenants. Many rely on a springing fixed-charge coverage ratio test, which applies only once line availability falls under an agreed threshold.

Outgrowing Factoring

As a business grows, it can often swap factoring for an ABL line of credit. The line usually costs less, takes in inventory alongside receivables, and lets the business keep collecting from its customers itself.

Asset-Based Loan Requirements

• Quality collateral: creditworthy customers, sellable inventory and equipment with real value

• Revenue at or above the lender's floor; minimums range between roughly $100,000 and $25 million annually, varying by lender

• Receivable agings and financial reports that are accurate and on time

• Clear title to the collateral, or plans to retire existing liens at closing

With a few lenders on Rainstar's platform, a startup holding strong receivables can qualify; most ABL lenders expect an operating history.

Application Documents

Rainstar's ABL document checklist covers a signed application, articles of incorporation, agings of receivables and payables, business tax returns for two years, financial statements for the year to date, and lists of equipment and inventory.

ABL Closing Timelines

Factoring and smaller receivables facilities can fund in days. Full ABL facilities, with their appraisals, field exams and legal papers, usually need several weeks. Typical holdups are agings that are incomplete, inventory records that fail to reconcile, existing liens and specialized equipment that needs appraising.

Recent Asset-Based Lending Deals

• An internet publishing company: a $5.5 million ABL facility

• An e-commerce company: $2.5 million in post-petition DIP financing, provided via an AR factoring facility

• A diesel products distributor: a $1.5 million factoring line

• A fuel distributor: a $2 million purchase order facility

When an Asset-Based Loan May Not Be the Right Fit

• Little in receivables or inventory. A cash-flow, SBA or equipment loan may suit better.

• The reporting load is too heavy. ABL depends on regular collateral reports, and weak bookkeeping slows funding.

• The need is small, one-time and urgent. An advance or other working capital may be the simpler route.

• Low-cost bank credit is within reach. If a bank is willing to lend against earnings at better pricing, that should be compared first.

Direct ABL Lenders and Rainstar Capital Group

Direct ABL lenders lend from their own balance sheets. Rainstar is instead a commercial financing intermediary: it reviews the company's collateral and needs, brings the deal to suitable ABL lenders, helps compare term sheets and coordinates due diligence up to closing. Rainstar's advisory fee is agreed in writing before the company applies.

How Rainstar Capital Group Supports Borrowers

• Collateral reviewed first: Rainstar estimates the eligible borrowing base before it approaches any lender.

• One submission, 20-plus ABL lenders: Rainstar's asset-based lending service reaches factoring companies, private credit funds, non-bank lenders and banks.

• Term sheets side by side: pricing, fees, advance rates, reporting and covenants.

• Seasoned bankers: Rainstar's middle-market team has experience in contract financing, senior credit and ABL structures.

Asset-Based Lending Questions and Answers

What does an asset-based loan look like in practice?

Picture a distributor holding $1 million of inventory and $2 million of eligible receivables. It might be offered a revolving line at 85% of receivables plus 50% of inventory, a total of $2.2 million. Availability then adjusts automatically as new invoices are booked and stock is bought. The figures are an illustration, not an offer.

How large can an asset-based loan be?

The ceiling is the borrowing base: eligible collateral times the advance rate for each asset. Receivables are often advanced at 80% to 90%, inventory at 50% to 75%, with lower rates for equipment and real estate. Facilities in Rainstar's network range between $100,000 and $150 million.

Is a minimum credit score required for asset-based lending?

On Rainstar's platform, most ABL lenders set no minimum credit score, since collateral drives the decision. Underwriters still look at tax status, existing liens, the owners' background and the business's financial condition, and for smaller facilities some also pull personal credit reports.

What do ABL rates and fees usually look like?

Sample annual pricing on Rainstar's platform runs roughly 5% to 30%, with factoring-style facilities at 0.5% to 2% monthly. Closing, monitoring, field exam and unused line fees are added on top. Bank ABL lines are the least expensive; facilities from non-bank lenders or for distressed borrowers cost more.

How does ABL differ from factoring?

Factoring is a sale: specific invoices pass to a factor, and the factor often collects from the customers directly. Under an ABL line, the company borrows against receivables and usually inventory, keeps collecting its own invoices and repays as cash arrives. Once a company is big enough to qualify, ABL generally costs less.

Are startups or loss-making companies eligible for an asset-based loan?

In some cases. ABL lends against collateral, so losses or a short track record do not automatically rule a company out. A few lenders on Rainstar's platform fund startups that have strong receivables, and others concentrate on turnarounds. Most still expect dependable reporting and sound collateral.

What if the value of the collateral falls?

When eligible collateral drops below the amount already drawn, the borrower is overadvanced and has to pay the line down or pledge more collateral, as the agreement specifies. Tracking availability every week helps head off surprises.

Does the lender take control of customer collections?

Customer payments are often routed to a lockbox or controlled account, with the lender applying the money to the line. Cash dominion, meaning full lender control of cash, applies at all times under some agreements and only after availability dips below a set level under others. Borrowers should ask each lender how it handles this.

Can current equipment and real estate loans stay?

Usually they can. The ABL lender holds first position on the receivables and the inventory, and the rights of each lender are set out in an intercreditor agreement. Sometimes the new facility retires the older loans at closing.

Is ABL an option for service businesses?

Yes, as long as they carry receivables. Companies in staffing, healthcare, transportation and professional services use facilities based on receivables, even with no inventory.

What happens when a major customer pays slowly?

Invoices older than the lender's cutoff, often around 90 days, are dropped from the borrowing base and availability shrinks. Heavy concentration in a single customer may be capped as well. A broader customer base and prompt collection keep availability higher.

Can an ABL facility fund an acquisition or replace a bank loan?

Yes. Lenders on Rainstar's platform provide ABL for growth, turnarounds, acquisitions and recapitalizations, and they regularly refinance a bank loan once the bank wants out of the relationship.

How quickly can an ABL facility close?

Smaller receivables facilities and factoring lines can be funded within days. A complete ABL facility typically needs several weeks because of legal work, appraisals and field exams. Preparing financial statements, inventory reports and agings ahead of time shortens the timeline.

Does Rainstar lend its own money?

No. Rainstar Capital Group works as a debt advisory firm. It compares ABL lenders from its 250+ lender platform, helps companies weigh term sheets and coordinates the closing. Funds come from whichever lender approves the facility, and Rainstar's fee is set down in a written agreement ahead of any application.

Related Financing Options

• Purchase order financing and accounts receivable financing

• Equipment funding, including sale-leasebacks

• Owner-occupied commercial real estate loans

• Hard asset funding, including luxury asset loans