Asset-based lenders: borrowing against debtors, stock and plant

Asset based lenders lend against the assets on your balance sheet rather than mainly against profit forecasts. A typical asset based finance facility starts with your debtor book and adds other assets on top, so a single limit can be supported by:

• Receivables. Unpaid invoices to business customers, usually the largest part of the facility.
• Stock. Raw materials and finished goods, valued more cautiously because they take longer to turn into cash.
• Plant and machinery. Equipment valued on what it would fetch if sold.
• Property. Commercial premises the business owns, in some facilities.

Cynergy Business Finance, for example, says all its facilities other than asset finance and block discounting must include a receivables element, and Aldermore describes its asset based lending as funding against machinery and property on top of an invoice finance facility. If you are new to the core product, our page on invoice finance explains it: a lender advances part of each invoice now and pays the balance, less charges, when the customer pays.

The amount you can draw is set by a borrowing base: the value of the eligible assets multiplied by the share the lender will advance against each. It is recalculated as invoices are raised and paid and as stock rises and falls, which is why lenders ask for regular debtor and stock reporting.

Advance rates for stock, plant and property are not published by the lenders below, so treat any figure you see elsewhere as an example. The lender sets them after looking at your assets, and they decide how much of the headline limit you can actually draw.

• Minimum size. ABL lenders publish high entry points. Check you clear them before spending time on an application.
• Which assets they take. Some lend on receivables only; others add stock, plant and property.
• What must be included. Some require a receivables line as the base of any facility.
• Security. Security over the assets is the basis of the facility. Aldermore says security may be required and that assets used as security may be at risk if the debt is not repaid.
• Reporting. How often you must update the debtor ledger and stock figures, and whether the lender audits them.
• Contract terms. Minimum period, notice and exit fees.
• Sector fit. Aldermore lists manufacturing, services, haulage and transport, printers, distributors, importers and wholesalers among the sectors its asset based lending suits.

The table is built from each lender's Capzy profile, which records only what the lender publishes itself. Lenders are listed alphabetically, and we do not rank or rate them.

Aldermore Bank offers asset based lending against debtors, plant and machinery, inventory and property, which it says may suit a larger company with a combination of assets. It works alongside an invoice finance facility, and Aldermore's invoice discounting and factoring advance up to 90% of invoice value. For invoice finance it generally looks for a minimum turnover of £750,000.

Cynergy Business Finance, the asset-based lending arm of Cynergy Bank, funds UK SMEs against receivables, plant and machinery, inventory and property, from £200,000 to £40,000,000 per eligible business. It lists growth, acquisition, turnaround and expansion among the situations it supports, and its site states that asset based lending is exempt from FCA and PRA regulation.

Receivables-only credit lines and other invoice and asset finance providers are in our lender directory, grouped by product.

Lenders look at the assets first and the business second. Expect them to ask for an aged debtor list, stock reports, a fixed asset register, recent management accounts and filed accounts, and details of any existing finance. Each decision is subject to status and lender criteria.

• A spread of creditworthy business customers, rather than one or two large ones.
• Stock that sells, with records good enough to count and value it.
• Plant that is owned outright, or with finance that can be settled.
• Clean records at Companies House and an up-to-date tax position.
• Management information the lender can rely on month to month.

Lenders will also check the charges already registered against the company. GOV.UK describes a charge as the security a company gives for a loan, and says charge details go on the company's public record. A charge not registered at Companies House within 21 days may make the debt difficult to recover if the company becomes insolvent, so the new lender will want its charge registered in time and may ask existing lenders to agree priority. Our guide to debentures explains fixed and floating charges.

Neither lender publishes its prices, so costs are quoted case by case. Expect interest on what you draw, plus some mix of arrangement, service, audit and valuation fees, and possibly a charge for unused facility. Aldermore says the balance of each invoice is released, less charges, once your customer pays. Ask for every fee in pounds at your expected level of use.

Asset-based lending also takes management time: regular reporting, lender audits and valuations. For a business with a large, clean debtor book and good systems, that is routine. For one without, it can be a burden.

• Invoice finance on its own, if most of the value is in receivables and you are below ABL minimums.
• Asset finance to buy or refinance a specific machine or vehicle.
• Sale and leaseback to release cash from equipment you already own.
• Stock finance to fund the purchase of goods for resale.
• Secured business loans for a single lump sum against property or other assets.

Asset-based lending is often used to fund a management buyout or acquisition, because the target's own assets support the borrowing. Manufacturers and distributors with heavy stock and plant are typical users; see our guide for manufacturing businesses.

Capzy is a credit broker, paid by the lender, and can introduce you to lenders whose criteria fit your assets. You can check your eligibility with a soft search that does not affect your credit score. Any offer is subject to status and lender criteria, and Capzy does not give financial advice.