Asset-based lending (ABL) is a type of lending that allows businesses to secure a loan by leveraging their physical assets as collateral. But how does asset-based lending work, and what makes it different from traditional bank loans? We sat down with Darren from Essex Lease Financial Corporation (ELFC), a Calgary-based direct lender specializing in industrial equipment financing, to get an inside look at ABL and how Essex’s approach stands out in the business of loaning money.
What is Asset-Based Lending, and Why Does It Matter?
At its core, asset-based lending is the business of loaning money using business assets as collateral. Darren put it simply: “The assets we are lending against are at the heart of every solution we build for a customer.” Unlike traditional lending, which prioritizes financial statements and credit history, asset-based lending work is focused primarily on the value of the collateral.
ELFC doesn’t just offer a single type of loan. Their approach spans across ABLoC (Asset-Based Line of Credit), refinancing, consolidation, and working capital lending—essentially, whatever a business needs to finance the purchase of equipment and support cash flow.
Who Benefits Most from ABL?
ABL isn’t just for businesses struggling with liquidity—it’s a financing option for growth-oriented companies.Darren explained, “Any business with hidden or locked equity in their equipment that wants to use it to drive growth or expansion can benefit.”
Industries that commonly use asset-based loans include:
- Transportation (trucks, trailers, vocational fleets)
- Construction (heavy machinery, service equipment)
- Oil & Gas Services
- Forestry
- Aggregates & Materials (where long cash flow cycles are common)
If your business has valuable assets that could be pledged as collateral, an asset-based loan might be the right financing option for you.
How Asset-Based Lending Works
One of the biggest questions businesses have is, “How do loans work in asset-based lending?” The answer is straightforward:
Key Factors That Determine Loan Amounts
ELFC evaluates:
- Type and value of the asset (longer-life, slow-depreciating assets qualify for higher borrowing capacity)
- Loan-to-value ratio (lower leverage for accounts receivable and inventory, higher for equipment and real estate)
- Financial covenants, credit history, and borrower character (but assets take priority over financial statements)
For businesses with weak credit but strong collateral, ELFC works hard to structure a loan that meets their working capital needs. “Equity in the deal becomes slightly more important, but we focus on structuring transactions that give customers the greatest chance of ongoing success.”
Common Concerns About ABL – Debunked
There are a lot of misconceptions about asset-based lending. Darren highlighted some of the most common concerns:
- “ABL is too expensive!”
- At first glance, asset-based lending (ABL) might seem costly compared to traditional bank loans. However, many overlook the hidden costs of financial covenants and balance sheet reporting. As Darren explains, “A properly structured asset-based loan is always better than a low-rate option with restrictive loan terms.” ELFC helps clients assess the true cost versus the opportunity cost of missing out on growth due to cash flow constraints.
- At first glance, asset-based lending (ABL) might seem costly compared to traditional bank loans. However, many overlook the hidden costs of financial covenants and balance sheet reporting. As Darren explains, “A properly structured asset-based loan is always better than a low-rate option with restrictive loan terms.” ELFC helps clients assess the true cost versus the opportunity cost of missing out on growth due to cash flow constraints.
- “It’s too complex.”
- ELFC simplifies the lending process by breaking it down step by step. “We talk through the features, advantages, and benefits of all ELFC products to match customers with the right financing option.”
Success Stories: How ABL Helps Businesses Grow
ABL isn’t just about securing a loan—it’s about helping businesses scale and thrive.
One example? Many ELFC clients have used ABLoC to get out of high-cost factoring agreements. Darren also shared how an aggregate industry client used ABL to support cash flow while financing long production cycles.
When a business might need immediate access to capital, having a flexible asset-based lender can be the difference between stagnation and growth.
Ongoing Support from an Asset-Based Lender
A great lender doesn’t just provide financing—they provide ongoing support.
ELFC’s asset-based loan clients receive regular check-ins to ensure financial stability.
“Throughout the application, approval, and documentation process, we reinforce the importance of communication. The sooner we know about potential issues, the better positioned we are to deal with them.”
This proactive approach helps businesses avoid financial surprises and navigate economic challenges before they escalate.
How Asset-Based Lending Differs from Traditional Bank Loans
Many businesses assume bank loans are the best choice. But Darren points out a key difference:
“Bank lending looks cheaper because of lower stated interest rates, but the hidden costs of compliance, monitoring, and restrictive covenants can be significant.”
With a traditional bank loan, businesses often spend more time meeting reporting requirements than actually running their company. If a business fails to meet its covenants, the lender may take unexpected action, putting the company at risk.
ABL, on the other hand, offers flexibility, creativity, and stability—three essential factors for businesses looking to manage cash flow effectively.
How to Get Started with Asset-Based Lending
If your business has assets that could be used as collateral to secure a loan, Essex Lease Financial is ready to help.
“Find a lending partner who spends more time asking questions about your company and your needs than they do talking about themselves.” ELFC takes the time to understand each client’s unique financing requirements before offering a tailored solution.
What You Need to Prepare:
- A list of available assets (equipment, accounts receivable, real estate, etc.)
- An understanding of your borrowing base and cash flow needs
- Openness to exploring different types of asset-based financing options
Next Steps:
Want to explore your asset-based lending options? Contact Essex Lease Financial Corporation today to discuss your financing needs!
Final Thoughts: Asset-based lending is a type of financing that can help businesses unlock liquidity, manage cash flow, and maintain stability in unpredictable markets. With a trusted asset-based lender like Essex Lease Financial, businesses can secure a loan without being weighed down by restrictive banking requirements.
Could your business benefit from asset-based lending? Reach out to Essex Lease Financial Corporation to learn more about their lending process and financing options!