Uses of the ABL Facility for Businesses
Asset-Based Loans (ABL) are a form of secured loans wherein a facility enables a borrower or issuer to draw, repay, and redraw funds within the span of the loan. The facility examines the quality, sufficiency, and value of the borrower’s collateral to be able to benefit from such a ABL Loan. This is a financing option for businesses who need a huge amount of money.
Business Sectors that Can Benefit from the ABL Structure
Here are the companies that can benefit from the flexibility of ABL:
• Distributors/ Retailers
• Service Businesses
Uses of ABL in the Business World
ABLs are used for different purposes, depending on the size and type of company that is borrowing. Here are some common uses of ABL:
• ABL is used for financing working capital by huge corporate borrowers. They use ABL to finance season changes in the capital market. It can be used to make acquisitions, repurchase programs, or make dividends.
• The ABL Facility provides financing solutions for midsize firms working capital and term loans. These companies offer collaterals in the form of machineries and real estate.
• Acquisitive firms, on the other hand, use ABLs to finance their acquisition structure. This involves junior capital.
• For companies facing profile deterioration, ABLs can also provide a solution. ABLs can provide the transitional or restructuring capital to enable the business to make a turnaround. The liquidity and flexibility of the ABL structure allows companies in turmoil to reposition and refinance their company.
Indeed, the asset-based lending structure has many uses for different types of companies. However, a company needs to fit into the qualifications of a facility to be able to use the ABL financing solutions. Also, they should have credible and quality collateral to present the facility as a form of security for the lender in case the business fails to comply with the repayment contract.