What is an ABL facility?
Asset Based Lending facilities are used to provide working capital to businesses. Having access to sufficient working capital is vital for businesses operating in a recovering or growing economy. The correct financing structure is pivotal to a business’ success. It ensures a business has the cash needed to grow, adapt, make acquisitions, or to simply help to manage day-to-day trading requirements.
With asset based lending facilities, cash is released from the receivable and stock element on the balance sheet. This gives a business access to additional amounts of working capital and allows the value of these assets to be re-invested back into the company.
For growing businesses, this is a very attractive way to fund expansion. It is flexible and agile in nature, as the funding line is linked to a company’s assets, growing as they do. In addition, access to funding is quicker and there is no need to reapply should you require further funding if your requirement grows.
Benefits of an ABL facility
Increased working capital
It is an efficient means to gain access to more working capital when you need it, without having to slow growth or raise cash through equity sale.
Freeing up capital tied up in your assets provides additional cash to fund organic growth or the means to acquire competitors.
An asset based facility provides the cash to fund management buy outs or to simply refinance traditional bank lending, which can be more covenant restrictive or expensive.
The funding line will grow in line with the growth of your assets and negate the need to continually re-apply for finance, which can slow growth and result in missed opportunities.
It can even out cash flow through seasonal or market fluctuations and enable a business to upgrade technology, invest in new plant and buy stock prior to payments being received.
It provides ready access to funds and empowers businesses to make fast buying decisions and act on growth opportunities.
ABL Funding Options
Asset Based Lending facilities were previously reserved for large Corporate entities. But with the growth in the sector more and more firms are extending these facilities to SME sized businesses. They work by trying to unlock the value of the balance sheet to provide cash and there are many different ways this can be achieved:
- Receivables owed to a business,
- Inventory or stock held by a company
- Plant and Machinery owned by the company
- Property owned by the company
- Additional cashflow loans
- EFG top up funding
How Oakmead Finance can help
Our team of asset based lending specialists have years of experience within the asset based lending sector. Because of this, we are best placed to advise and arrange facilities through a network of traditional and specialist lenders within the industry.
Contact us to discuss your requirements, explore the asset based lending options available to you or have us review your existing finance facility.
We were approached by a successful and fast growing UK business supplying raw materials into the engineering sector. Wanting to expand their horizons, they were looking into moving into new markets overseas.
Having seen phenomenal growth over the past few years to £10.4m, the business was looking to invest in new plant in the Far East. It was hoped that this would act as a springboard into the Asia Pacific region. The business originally approached their bank to help fund this expansion and were introduced to the banks invoice finance department who made an offer of a facility.
The client was then introduced to us by their accountant, so that we could obtain a marketplace comparison on the terms they had been offered.
The Client was then introduced to Oakmead Finance by their accountant to obtain a market place comparison on the terms they had been offered.
Our head of asset based lending met with the client to discuss the growth strategy and their requirements. As a result of this, it soon became apparent that the invoice finance facility would have provided a short term solution, but alone it would not have provided sufficient working capital to meet their funding requirements and further the business’ trade cycle.
The financial director was aware of this and said the management were going to inject further cash themselves when it was required. Rather than investing more money, we suggested that they look to raise additional working capital against their inventory. This would enable them to meet their funding requirements and provide them with sufficient headroom.
By having established relationships with a number of asset based lending providers, we helped structure a £2.5m invoice finance facility against their receivables and an additional £1m facility against their inventory.
The additional funding has enabled the business to successfully open their Far East operations, they have continued this growth by expanding into the south east Asian and Pacific region, all without the need for further directors’ loans.
“It was refreshing to deal with a firm which has the experience and knowledge to challenge our business plans and make well a structured proposal on how we may do things better, rather than just giving us what we thought we wanted. We are now in a far better place than we might have been thanks to Oakmead Finance.”
Oakmead Finance Ltd is a company registered in England & Wales with company number 09478864. The registered office address is Lynwood House, Crofton Road, Orpington, BR6 8QE
Asset Based Lending facilities are not regulated by the Financial Conduct Authority.