Busting myths about Asset Based Lending
Meeting with advisors, investors and prospective borrowers regularly, our Head of Asset Based Lending, Oliver Wilson, has come across some misconceptions about ABL. Oliver uncovers the myths and summarises the value that this facility can bring to businesses.

At a glance
Over the last year, I have been up and down the country talking to advisors, investors and prospective borrowers and in that time, have encountered a number of myths about Asset Based Lending that are still in circulation. ABL is a fantastic solution that allows asset heavy businesses to leverage these assets to generate cash flow, whether that be to support them through leaner times or to expand operations.
Our latest research* revealed that nearly four in ten (29%) of SMEs are utilising an asset-based loan (ABL) with nearly a further quarter (23%) saying that they plan to use one in the future. On the other hand, just over a third (34%) say they never plan to use ABL loans for their business, perhaps part of this number is driven by the common misconceptions of this type of finance.
Whilst ABL is not the right choice for every business in every situation, it is important that business leaders are clear on what the structure does and that those all too popular myths are busted.
Myth 1
ABL is mostly a last-resort financing option reserved for companies in distress
Of course, ABL has some of its heritage in turnaround and remains a great option to support businesses bouncing back from tough situations. However, ABL can benefit thriving businesses, too! By using multi asset structures like receivables, inventory, property and equipment as collateral, companies can often unlock more liquidity without disrupting their operations. With holistic structuring tailored to the business need, ABL provides structured financing for a variety of use cases.
For profitable SME's, cashflows as well as assets can be leveraged together, in compliment to each other, to provide a truly combined solution. This approach to modern ABL can really provide the flexibility to fuel growth, make acquisitions, or manage cash flow effectively.
Myth 2
ABL is overly complex and time-consuming
In reality, this is becoming less true by the day as the process becomes more streamlined, with lenders increasingly leveraging technology to evaluate assets and speed up deal processes. With the right partner, businesses can access funds quickly and efficiently and advisors can help by providing collateral diligence earlier in the process. In most cases, collateral diligence takes less time than FDD and CDD so really shouldn't elongate timelines.
Certainly, if you are a larger borrower, then the operational and structural options available bear no resemblance to the clunky, unsophisticated systems of old. Borrowing base facilities; flexible revolvers that build in fixed assets as well as current assets and combination structures built against both the assets and the cash flows in a simple and light touch framework can be achieved.
This only works though if the business has good management information, systems and financial controls. Businesses without this will struggle as data is king in these structures. Well run finance teams in information focused businesses can leverage this to their advantage through asset based structures.
Myth 3
ABL leads to a loss of control over my business and/or assets
In reality, for almost any type of senior lending, the borrower will have to provide an 'all assets debenture' as security and this is essentially pledging your business assets as security anyway. However, if using an ABL structure, whilst the specific assets may be 'charged' to the lender, this does not mean that the lender will be interfering in day to day operations or asserting any practical 'control' over your assets unless the business has failed and they are in recovery mode.
Quite the contrary in fact.
In many cases, it's the very fact that the lender has assessed the assets, understands their value and has provided an ABL facility that leads to greater flexibility.
To elaborate, where lenders are completely reliant on the continued profitability of the borrower as their main source of repayment, the conditionality, or covenants, the lender uses, must protect them against any downturn in performance. This is because the impact of sustained reduction in profits may be terminal to their loan. As a result, the tramlines within which the lender is comfortable to operate can be quite narrow. This in turn, may reduce the freedom the business has to invest in things like opportunistic capex, grow at pace or to weather adverse working capital swings if performance is anything less than stellar.
For some growth businesses, the flexibility afforded by an ABL facility, where liquidity is a more prevalent driver of appetite, can provide greater levels of financing and wider tramlines within which to operate - thus affording the borrower more control of the business.
For any SMEs that are considering exploring the possibility of an ABL facility in the near future, a good starting point is to first gain a full understanding of the assets on the company's balance sheet. Once this has been achieved, companies can then engage specialist lenders or existing funding partners to assess where value might be unlocked.
* The Shawbrook research was conducted by Censuswide, among a sample of 500 senior financial decision makers (18+) (CFOs, FDs, MDs, CEOs) at or owners of Small and Medium Sized Businesses. The data was collected between the 2nd of January 2025 and 10th of January 2025.
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Oliver Wilson – Head of Asset Based Lending
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