The Expanding Role of Asset Based Lending

Asset-based lending (ABL) is a form of financing that leverages assets as collateral to unlock availability from working capital for the purpose of covering operational expenses and funding growth objectives. Often structured as revolving lines of credit—which allows businesses to borrow, repay, and borrow again based on their needs—as a business’s assets grow, so does its borrowing capacity. To better understand how this lending arena has developed and where it stands today, we spoke with Albert Spada, Executive Vice President and Head of M&T Business Capital.

How has ABL evolved and what is its current outlook?  

Traditionally, ABL was utilized by asset-rich but cash-strapped businesses that were experiencing financial challenges or inconsistent cash flows. These borrowers were seen as high risk and in need of closer monitoring. That is no longer the case. Today, the ABL product is used by a large number of businesses for a variety of applications—such as growth, acquisitions, capital expenditures, dividend recapitalizations, as well as restructurings.

Due in large part to the current economic uncertainty, the ABL industry remains healthy and increasingly optimistic, with banks and non-banks reporting a surge in new deal activity when ABL was seen as primed to meet new demand over the remainder of the year. Indeed, ABL’s future continues to remain undeniably bright.

Is ABL considered a growth and revenue driver?

As assets are converted to cash, borrowing capacity is enhanced either through a revolving line of capital or a term loan, depending on the business’s specific needs. Asset availability grows and/or contracts to accommodate seasonal or project-based fluctuations, increasing the ability to cover operational costs more easily, capitalize on growth-building opportunities, and fund turnarounds or restructuring. ABL is a cost- efficient alternative to traditional corporate finance structures that helps borrowers avoid taking on high-interest debt to fund its growth.

What industries and assets make good ABL candidates?

Business borrowers were once largely in the manufacturing or retail sectors but as ABL has grown in popularity, it’s become more accepted across a broader spectrum of industries. ABL products are now used by importers/exporters, staffing, wholesale distribution, energy, rental equipment, transportation, services, health care, agriculture, and financial companies.

The slate of potential assets have expanded as well. Historically, the most common collateralized business assets were accounts receivable, inventory, equipment, and real estate, but it now may include intangible goods such as intellectual property (patents, trademarks, copyrights, etc.), future cash flows, contracts, or leases, as well as marketable securities.

Please give us a real-life example of how a customer used ABL to achieve growth objectives.

An appliance import company was experiencing rapid growth and needed additional working capital to keep up with increasing demand. However, the company faced challenges in securing traditional financing due to inconsistent cash flow and a less-than-perfect credit history coupled with the uncertainty of new tariffs. To address these challenges, it turned to ABL and was able to leverage its substantial inventory and accounts receivable as collateral. The lender assessed the value of these assets and provided a revolving line of credit based on a percentage of its value.

This allowed the company to borrow, repay, and borrow again as needed, providing the flexibility to manage cash flow effectively. It was able to sustain its growth, meet customer demand, and improve its financial stability. The flexibility and scalability of ABL provided the company with the necessary funds to invest in new projects, expand its operations, diversify into new sources of supply, and achieve its growth objectives.

What should a company look for in an asset-based lender?

Nothing succeeds like success. You’ll want to look for a deeply experienced, trusted lender to help your business navigate the complexities of ABL. A reliable lender’s track record and reputation should not be hard to discern. Look for industry recognition, customer reviews, and personal recommendations that speak to consistent, reliable service. 

Aim to find a lender that aligns with your growth strategy and can offer customizable financing options, competitive rates, and favorable loan terms. A lender is in essence a partner with whom you’ll work closely over the loan period and perhaps beyond. You’ll want a partner with industry intelligence and an awareness of unfolding trends—one that prioritizes transparency and a willingness to answer questions, and also instills confidence that your business is valued.

To start a conversation about how ABL may benefit your business, provide your contact information here, or write to Albert Spada directly at aspada1@mtb.com. 

M&T's Lending Leadership

M&T Bank was founded in 1856 by businessmen for businessmen (specifically, manufacturers and traders). Today, it is part of the M&T corporate family—one of the 15-largest U.S.-owned commercial bank holding companies. With $211.5 billion in assets and an impressive 196 consecutive quarters of profitability, M&T is a powerful combination of strength and experience.

It is a highly ranked lender, especially for Small Business Administration (SBA) loans, having consistently ranked among the top 10 nationally for 16 consecutive years and finished the 2024 fiscal year as the 10th-largest lender in the country. The bank also holds high rankings within specific communities, often being the #1 lender in its largest markets and maintaining a strong deposit market share in its core Northeast markets.