Asset-Based Lending: How It Works and Who Qualifies
Asset-based lending explained: how lenders secure loans with receivables, inventory and equipment, who qualifies, and how to apply for middle-market ABL.
Asset-based lending (ABL) is a loan or credit line secured by a company's assets, such as receivables, inventory or equipment. According to Investopedia, the lender looks mainly at the value of those assets rather than only at the business's cash flow. Thrive Funding arranges ABL for middle-market companies from private lenders, but Thrive is not the lender. The lender makes every credit decision.
What asset-based lending means
In an ABL deal, the collateral does most of the work. If the borrower cannot repay, the lender can claim the pledged assets. Wikipedia describes it as lending secured by an asset, which is why ABL is often sized against a borrowing base rather than a flat amount.
ABL is not the same as hard money lending. A hard money loan is a short-term loan secured by real estate value, as ABL Funding explains for its own real estate products. Business ABL uses operating assets, mainly receivables and inventory, and it is usually a revolving facility.
How an ABL deal works
- Collateral review. The lender checks which assets qualify and how much they are worth.
- Borrowing base. The lender applies advance rates to eligible collateral to set how much the company can borrow at any time.
- Reporting. The borrower reports collateral levels on a set schedule. Bank of America notes that simplified reporting is one feature of ABL.
- Draws and repayments. As receivables are collected and inventory is sold, the available credit moves up and down.
Which assets lenders accept
Receivables are usually the first asset lenders look at. Bank of America says that typically only current receivables are considered, meaning those less than 90 days from invoice date or no more than 60 days past due. Invoices outside those limits often count for nothing in the borrowing base.
Inventory and equipment can also be pledged, but each lender sets its own rules on what it will accept. Some assets are excluded entirely, so the usable collateral is often smaller than the balance sheet suggests.
Who uses asset-based lending
ABL fits companies whose balance sheets hold real value, such as distributors, manufacturers and companies with large receivables from customers. Banks and non-bank lenders both offer it. Bank of America groups its own commercial clients by revenue, and its ABL material covers companies at several revenue levels, so size alone does not decide whether ABL is possible.
How big the market is
Estimates of the market vary a lot, so check the method before you rely on a number. Global Market Insights puts the market at USD 827.3 million in 2025, while The Business Research Company puts it at $891.89 billion in 2025, growing at a 12.8% compound annual growth rate to $1005.77 billion in 2026.
The bank side is still large. According to Global Market Insights, reporting bank lenders in the Secured Finance Network survey held USD 369.5 billion of commitments at the end of 2025, and non-bank outstandings rose 12.6% quarter over quarter.
ABL compared with other middle-market debt
| Feature | Asset-based lending | Cash flow lending |
|---|---|---|
| Main basis for the loan | Value of pledged assets | Expected operating cash flow |
| Typical collateral | Receivables, inventory, equipment | Often broader business assets |
| Borrowing limit | Set by a borrowing base that moves with collateral | Set by earnings and leverage tests |
| Reporting | Regular collateral reports | Financial covenants and statements |
The right structure depends on the business. Many middle-market companies use ABL alongside other debt.
How to apply through Thrive Funding
Thrive Funding is a private credit broker for middle-market companies. It offers senior debt, ABL, mezzanine and acquisition financing. You submit one application at thrivefunding.com/apply, and Thrive matches it against lending groups whose criteria fit the deal size, revenue, EBITDA, industry, state, loan type and pricing. Thrive's site leads with requests of $5M or more, and its application accepts requests of $1M or more. Requests under $1M receive an automatic decline.
If a lender says yes to the anonymous deal summary and you agree, up to three groups get introductions, best fit first. Each lender issues its own term sheet. Thrive then sends you a side-by-side summary and you choose. Thrive is paid by its lending partners, and the success fee is owed only when a loan closes. Any figures Thrive gives before a term sheet are indicative terms, not an offer.
Sources
- Asset-Based Lending: Definition, How It Works, and ...
- Asset-based lending
- Asset Based Lending
- What is Asset-Based Lending (ABL) & How Does it Work
- ABL mythbusters: The truth about asset-based lending
- Asset Based Lending Market Size & Share 2026-2035
- Asset-Based Lending Market Size, Drivers Report 2026-2030
Frequently asked questions
How does asset-based lending work?
The lender takes a security interest in your assets and sets a borrowing limit based on the value of eligible collateral. As your receivables and inventory change, the amount you can draw changes too. You report collateral to the lender on a regular schedule.
What are the requirements to qualify for an asset-based loan?
Lenders look first at the quality and size of your collateral. Bank of America notes that receivables generally count only if they are current, meaning less than 90 days from invoice or no more than 60 days past due. Each lender sets its own criteria. Thrive accepts requests of $1M or more and matches them to lenders whose criteria fit.
What banks do asset-based lending?
Large banks including Bank of America and U.S. Bank publish ABL material for business clients. Non-bank private lenders also provide ABL, and Global Market Insights reports that their outstandings grew 12.6% quarter over quarter in late 2025.
What is middle market financing?
Middle market financing is private credit for mid-sized companies. Thrive Funding arranges it from private lenders for borrowers seeking $1M to $100M or more, including senior debt, ABL, mezzanine and acquisition financing.
Chris Irving
Co-Founder @ Thrive
Arranges middle market financing with private credit funds, asset-based lenders and other lending partners.
