Asset-Based Lending: Revolving Lines of Credit That Grow With Your Business
Borrow against your receivables, inventory, and equipment. Keep your own billing and customer relationships.
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What Is Asset-Based Lending (ABL)?
Asset-based lending (ABL), also called asset-based financing, is a revolving line of credit secured primarily by your accounts receivable, with inventory and equipment added as needed. What you can borrow is set by a borrowing base, a percentage of the asset value of your eligible collateral, not a multiple of your cash flow. As your collateral grows, so does your line.
You keep your invoices.
Unlike invoice factoring, you do not sell your invoices. You keep your own billing and collections, and you draw on the line when you need capital.
A Bridge Between Factoring and Bank Credit
Meritus revolving lines of credit sit between invoice factoring and traditional bank credit. They are built for companies that have outgrown factoring, have tripped a bank covenant, or are stabilizing after a setback.
Traditional banks size credit based on cash flow. An asset-based line is sized on your company's assets, so it can fit when a bank line no longer does. That is not a distress story. It is a stabilization story, with a credible path back to bank-qualifying financials.
Growing Fast
You have outgrown factoring or merchant cash advance debt. Sales have scaled, and you now need inventory financing in addition to your accounts receivable financing.
Recovering From a Setback
You run an established, historically profitable business that hit a one-time setback, such as tariffs, litigation, or a swing in demand. You need a bridge back to bank-qualifying financials.
Funding an Acquisition
You are an ownership team or private equity group acquiring a business and using its assets to help fund the purchase.
How Asset-Based Lending Works
We Size Up Your Assets
We review your receivables, inventory, and equipment to build your borrowing base, the pool of eligible collateral your line is built on. That includes a field exam and, where needed, a collateral appraisal, so your line is sized to the real value of your company's assets. Advance rates vary by asset type, and receivables carry the highest rates.
Draw What You Need
Draw against your line whenever you need capital, so you can manage cash flow, cover expenses, meet payroll, purchase inventory or raw materials, or win the next contract. Interest applies to what you draw. As your customers pay down their invoices, your available line refreshes. Unused line fees and annual fees apply.
Your Line Grows With You
As your book grows, so do your borrowing capacity and your revolving line of credit. Eligible line increases come with minimal paperwork, so you can support business growth, take on a new customer, or enter a new market without refinancing from scratch.
How Customer Payments Work on an Asset-Based Line
In the most common structure, you keep your existing business bank account. We place a control agreement on the account, and incoming payments sweep to pay down your line, which creates new availability for you to draw again.
In that structure, your customers see no change, and you stay in charge of the relationship.
Who Qualifies for Asset-Based Lending?
Asset-based lending is built for established businesses with strong, steady revenue and solid financial reporting. It is a good fit if you:
We underwrite on the total value of your collateral, not on revenue alone.
Not there yet?
Invoice factoring and payroll funding are built for earlier stages, and we can look at a line of credit when the time is right. See how we work with manufacturers, wholesale and distribution companies, and staffing firms.
Asset-Based Lines of Credit for E-Commerce and Hybrid B2B and DTC Brands
Most e-commerce lending comes from merchant cash advances and revenue-based lenders. Those products are fast, but often expensive and not built for sustained working capital.
Meritus offers inventory financing structured as an asset-based revolving line of credit, sized to the appraised value of your inventory rather than a flat-rate cash advance. Compare the true cost of borrowing, not just the speed of funding.
Pure E-Commerce Inventory Line
A revolving line of credit secured by inventory, for direct-to-consumer brands selling primarily online. Sized against the appraised value of your inventory.
Hybrid B2B and DTC Facility
For companies that sell both to businesses and directly to consumers. A receivables-secured line covers the B2B side, paired with an inventory-secured line for the DTC side. One facility, two components, sized to how your business actually operates.
How the facility works
Who fits
Pure drop-shipping with no owned inventory is not a fit because this is an asset-based product, not a cash-flow product. Some marketplace and retail vendor arrangements are reviewed on a case-by-case basis.
What Does an Asset-Based Line of Credit Cost?
Wondering what an asset-based line of credit costs? Your advance rates, interest rate, and fees depend on your collateral and how your facility is structured, so there is no single published rate. Your line is sized to the real asset value of your collateral and priced competitively against what traditional banks offer. Your interest rate applies to what you draw, not the full line. Unused line fees and annual fees also apply.
What you draw, not the full line
Your interest rate applies to the amount you draw.
What to Compare When Evaluating Asset-Based Lenders
Invoice Factoring or Asset-Based Lending: Which Fits Your Business?
Both are forms of accounts receivable financing. With factoring, you sell your outstanding invoices. With an asset-based line, you borrow against your unpaid invoices and keep collecting them yourself. Both are available through Meritus Capital.
Why Businesses Choose Meritus Capital for Asset-Based Lending
Sized to Your Assets
Financing based on the real asset value of your collateral, not a multiple of your cash flow.
Grows With Your Book
Your available line refreshes as customers pay, and eligible increases come with minimal paperwork.
Your Customers Stay Yours
You keep your billing and collections. In the most common structure, customers see no change.
Full Range, One Team
Factoring, payroll funding, and lines of credit under one roof, so a move from one to another does not mean starting over.
Frequently Asked Questions About Asset-Based Lending
What is an asset-based line of credit?
An asset-based line of credit, also called asset-based lending, asset-based financing, or ABL, is a revolving line of credit secured by your accounts receivable, with inventory and equipment added as needed. It functions as a working capital line of credit to help you manage cash flow. You can borrow up to a borrowing base, a percentage of your eligible collateral, and your availability grows as your collateral does.
What is the difference between asset-based lending and invoice factoring?
With invoice factoring, also called payroll funding in the staffing industry, you sell your receivables, we advance the cash, and we collect from your customers. With asset-based lending, you keep your receivables and borrow against them, along with inventory and other eligible collateral, and you keep your own billing and collections. Factoring is built for speed and flexibility. Asset-based lending suits established businesses that want a larger, more cost-effective line of credit and greater control. Some businesses start with factoring or payroll funding and add a line of credit as their balance sheet grows.
How do my customer payments work with an asset-based line of credit?
In the most common structure, you keep your existing business bank account, and we place a control agreement on it. Incoming payments sweep to pay down your line, which creates new availability to draw on again. Your interest rate applies to the amount you draw. Unused line fees and annual fees apply.
What can I borrow against?
Most commonly your accounts receivable, which carry the highest advance rates. Depending on your business, your line can also be secured by inventory, machinery, equipment, and real estate. We help you identify which assets qualify.
What does the approval process involve?
Asset-based lending involves more due diligence than factoring. It typically includes a pre-funding field exam and, in some cases, a third-party collateral appraisal. Once your facility is in place, you provide borrowing base reporting, typically on a weekly basis, to keep your available line current. Set-up takes longer than factoring, which can fund in as little as 3-7 days. Our team guides you through each step.
Do you offer lines of credit for e-commerce brands?
Yes. Meritus offers inventory financing for e-commerce brands as an asset-based line of credit secured by your inventory, and a hybrid facility for businesses that sell both to businesses and directly to consumers. The hybrid facility pairs a receivables-secured line for the B2B side with an inventory-secured line for the DTC side. Pure drop-shipping with no owned inventory is not a fit.
Ready to Talk About a Larger Line?
Tell us about your receivables, inventory, and equipment. We will walk you through what a Meritus revolving line of credit could look like for your business.
Questions? Call 877-648-3709
More questions? We're here to help.
Send us a note and our team will reach out to you or simply call us at 877-648-3709