What is Asset Based Lending? | Riverdale Funding

What is Asset Based Lending?

Dec 28, 2016


Within lending circles, the term “Asset-Based Lending” (ABL) is growing in popularity. Traditionally, the term is used to describe a type of business loan or line of credit that used a company’s assets (i.e. accounts receivables or balance sheet assets like inventory, equipment, and other tangible items) as collateral.  In this scenario, companies utilize ABL’s to meet cash flow demands or use the funds to expand their business operations.
However, the term “Asset-Based Lending” is expanding to also describe alternative commercial real estate financing.  It has also been referred to as "Asset-Based Financing".  This type of lending primarily uses the value of the real estate property to be used for collateral as the determining factor in providing a loan.



A conventional commercial real estate lending practice typically involves:

  • A pre-analysis of the commercial property’s value and its ability to debt service the loan which it is securing. 
  • The borrower(s) providing a good faith deposit to pay for third party reports and in some cases miscellaneous loan processing expenses.
  • Gathering an extensive amount of borrower(s), property financial documentation, and third-party vendor reports.
  • Having a complete loan package reviewed by an underwriter and often having their findings and recommendations re-reviewed by a senior underwriter and/or loan committee


This loan request with a conventional lender may or may not ultimately get approved but the above-mentioned process will still usually take six to twelve weeks.



Alternative Commercial Real Estate Financing

Asset-Based Lending through an alternative commercial real estate lender would not need as much time to assess a borrower’s and their property’s lending viability.  The biggest difference between this type of lender and a conventional lender are third and fourth steps (mentioned above) – what information is gathered and how the loan is reviewed.

With an asset-based lender, less information is requested.  If fact, “true” asset-based lenders do not require a borrower to provide financial documentation and are willing to accept all levels of credit history.  Two or three years of tax returns are not required. Nor are bank statements, proof of income or a commercial property’s operating history, and itemized income and expense statements. What this creates is an efficient and streamlined loan process by which a borrower can quickly receive a loan approval and the financing they are looking.  Moreover, often times asset-based commercial lenders also do not have multiple levels of loan review and loan approvals.  Asset-based lenders are often private lenders who are not restricted by federal lending regulations and review agencies.  If the commercial property offered as loan security meets the lender’s loan to value ratio and their risk tolerance, they can proceed to loan approval.  From "call to closing", a borrower can receive the financing they seek, fast.

Yes, this type of lending also comes does come with higher interest rates and cost of borrowing.  However, for those borrowers who are in need of fast money to satisfy a time-sensitive commercial real estate purchase, or for those borrowers who may have been turned down by other lenders because of blemishes on their credit or short-comings on their financial documents – asset-based alternative commercial lending is a viable solution. 


This article is a part of our Getting a Commercial Loan: Complete Guide, a comprehensive resource for anyone looking to secure a commercial loan. Read more at the link.