Asset-Based Lending in Texas
Asset-based lending (ABL) is a structured form of financing where the loan amount is determined primarily by the value of specific business assets — accounts receivable, inventory, equipment, or real estate. The lender monitors asset values continuously and adjusts the borrowing base accordingly. ABL is used by businesses with strong assets but uneven cash flow or complex credit profiles.
- Typical deal size: $500,000 to $50,000,000+ (ABL scales with asset base)
- Collateral: accounts receivable, inventory, equipment, or real estate — appraised and monitored
- Borrowing base: typically 70–85% of eligible AR, 50–65% of eligible inventory
- Minimum time in business: 2+ years typical; lenders underwrite the assets, not just the business
- Industries: manufacturing, distribution, staffing, construction, oil and gas services
Overview
Asset-based lending is a category that applies when a business has substantial assets — particularly accounts receivable and inventory — but cannot qualify for traditional bank financing based on cash flow or credit history alone. The lender's analysis starts with the asset, not the income statement.
The core structure of ABL is the borrowing base certificate: a periodic calculation of the eligible assets against which the lender will advance funds. A receivable that is more than 90 days past due, concentrated in a single customer above a threshold, or from a related party typically does not count toward the borrowing base. Inventory that is obsolete, uninsured, or stored off-site is similarly excluded. The credit facility revolves around the eligible asset base.
ABL is common in Texas for three industries in particular: distribution and wholesale businesses with large receivable pools, oil and gas services companies that bill large clients on net-30 to net-90 terms, and manufacturing companies with significant work-in-progress and finished goods inventory.
Texas ABL lenders range from the large national banks — Wells Fargo, JPMorgan, Bank of America — with dedicated ABL units in Dallas and Houston, to regional banks and non-bank specialty finance companies. Deal size matters: ABL below $1,000,000 is generally handled by factoring companies and asset-based lenders who specialize in smaller facilities. Above $5,000,000, institutional lenders dominate.
The monitoring requirement distinguishes ABL from other lending: the lender has ongoing access to borrowing base data and may conduct field exams and inventory appraisals at borrower expense. Businesses that view lender monitoring as intrusive are not a fit for ABL.
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Frequently Asked Questions
How is asset-based lending different from accounts receivable factoring?
Factoring involves selling receivables to a third party at a discount. ABL uses receivables as collateral for a revolving loan. With ABL, you retain ownership of the receivables and pay interest on drawn balances. With factoring, the factor takes ownership and collects directly from your customers.
What is a borrowing base certificate?
A borrowing base certificate is a periodic report that calculates the eligible assets against which the lender will advance funds. The lender reviews it regularly — weekly, monthly, or quarterly depending on the facility — and adjusts available credit accordingly.
Does ABL require personal guarantees?
Most ABL lenders require a personal guarantee from owners with 20%+ ownership. The guarantee provides recourse against the owner personally if the business defaults and asset liquidation is insufficient to cover the loan.
What industries use asset-based lending most in Texas?
Distribution, manufacturing, oil and gas services, staffing, and construction are the most common ABL borrowers in Texas. These industries share the characteristic of holding significant receivables or inventory relative to their cash balance.
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Page last updated: August 2026