ABL Financing: How Asset-Based Lending Works in 2026
ABL financing is a loan or revolving credit line secured by a company's assets, mainly accounts receivable and inventory. The lender sizes the loan against the value of those assets, not mainly against the company's profit, so it can suit businesses that are growing fast, carry seasonal swings, or have uneven earnings.
ABL stands for asset-based lending. The term also covers asset-based financing in general, but in practice it usually means a revolving facility that a company draws on and repays as sales come in and go out.
How ABL financing works
The lender first reviews the assets the company wants to pledge. It then sets a borrowing base, which is the maximum the company can draw at any time. The base moves up and down as receivables are collected and inventory is sold or bought.
Accounts receivable are usually the first asset considered. According to Bank of America, typically only current receivables are counted, meaning those less than 90 days from the invoice date or no more than 60 days past due.
Advance rates set how much of each asset counts toward the base. As an example, U.S. Bank describes a facility that lets a borrower draw up to 90% of eligible accounts receivable and 75% of eligible inventory. Real advance rates vary by lender, industry and asset quality.
Because the loan is tied to live asset values, lenders usually ask for regular reporting, such as aging reports for receivables and inventory counts. That reporting is the main ongoing work for the borrower.
What counts as eligible collateral
Not every asset qualifies. Lenders often exclude receivables that are past due, owed by related parties, or owed by customers in certain countries. They also discount obsolete or slow-moving inventory. The eligible pool is what matters, not the total balance sheet.
ABL compared with cash-flow lending
| Feature | ABL financing | Cash-flow lending |
|---|---|---|
| Main basis for the loan | Value of receivables, inventory and other pledged assets | Projected or historical earnings (EBITDA) |
| Typical use | Working capital, seasonal needs, growth | Acquisitions, refinancing, general purposes |
| Reporting | Frequent collateral reports | Financial statements and covenants |
| Fit for uneven earnings | Often better | Often harder |
The iCapital research note makes a related point about risk: it estimates average ABL loss rates at 10 to 20 basis points, against roughly 100 basis points for direct lending. Lower loss rates are one reason lenders see the structure as secure, though that is a market-wide estimate, not a term for any single borrower.
How big is the ABL market?
The market is large and has grown. According to LSEG, the most recent study it cites puts total asset-based loan commitments at around $542 billion at the end of 2024, up from just under $400 billion at the end of 2018. LSEG also counts 95 active asset-based borrowers with loans of $1 billion or more at year-end 2024.
Who ABL financing suits
ABL is most common among companies with significant receivables or inventory and a clear record of collecting from customers. Manufacturers, distributors, wholesalers and some service firms with large invoices often use it. Early-stage companies with few assets may find a cash-flow or venture structure a better match.
For a company with a mix of asset types, ABL can sit alongside other debt. Senior debt, mezzanine debt and acquisition financing each have different terms, and a lender may combine them.
Getting ABL financing through Thrive Funding
Thrive Funding arranges private credit for middle-market companies. It is not a lender, so every credit decision is made by the lending group. Thrive lists ABL among the products it arranges, alongside senior debt, mezzanine and acquisition financing.
The process starts with one application. Thrive matches it against lending groups whose criteria fit the deal size, revenue, EBITDA, industry, state, loan type and pricing. Groups that match get an anonymous deal summary and reply yes or no. Once the borrower agrees, up to three interested groups are introduced, and each lender issues its own term sheet. Thrive sends the borrower a side-by-side summary, and the borrower chooses.
The typical request Thrive handles is $1 million or more. Requests below $1 million are declined automatically. Thrive is paid by its lending partners, and every borrower email says so. Any figures Thrive sends before a lender's term sheet are indicative terms, not an offer.
FAQ
What does ABL stand for in finance?
ABL stands for asset-based lending. It means a loan or credit line secured by company assets such as receivables and inventory.
How does ABL financing work?
The lender sets a borrowing base from the value of eligible assets. The company draws against that base and repays as receivables are collected. The base changes as the assets change, and the company reports them regularly.
What is middle market lending?
Middle market lending means loans to mid-sized companies, which are larger than small-business loans and smaller than the largest corporations. Deal sizes and borrower criteria vary by lender, so fit matters more than a fixed threshold.
What is a middle market loan?
A middle market loan is a loan made to a mid-sized company, usually from a private lender or fund rather than a public bond market. Structure depends on the lender and the collateral.