FreightWaves Ratings cuts through the noise of freight technology product reviews to make you a smarter buyer

What is asset-based lending and how does it work?

Looking to secure a business loan for your trucking company? Consider asset-based lending! By using your trucks or other assets as collateral, you’re able to secure an influx of cash when you need it most. Find out today if asset-based lending is right for you. 

What Is ABL?

Asset-based lending, also known as ABL, allows businesses to secure loans by using business assets such as inventory, accounts receivable, or equipment as collateral. Unlike traditional business financing, asset-based lending is flexible and focuses on your business assets rather than current cash flow.

How Does Asset-Based Lending Work?

It’s common for a business to need loans quickly. But what happens when the company cannot demonstrate its ability to pay based on its cash flow alone? That’s when asset-based lending comes into play. Instead of the loan being tied to cash, the business pledges an asset to the lender as collateral. 

The lender will then offer the business a loan based on the agreed-upon percentage of the asset’s value. 

What Are the Types of Asset-Based Loans?

There are four main types of asset-based loans. These include accounts receivable financing, inventory financing, equipment financing, and real estate financing. 

Who Uses Asset-Based Lending?

Asset-based lending typically helps small to medium-sized asset-rich companies secure loans. Some industries that commonly use asset-based lending are manufacturing, engineering, wholesalers, and trucking. 

Along with other lending options available for trucking companies, such as equipment financing, asset-based lending helps truckers and owner-operators secure the funds they need to run their business. 

How Do You Qualify For Asset-Based Lending?

Trucking companies and owner-operators can qualify for asset-based lending with detailed and accurate financial information. Then, the borrower will typically put up an assessed asset, such as trucks or trailers, as collateral. 

Some lenders may not require a credit check or collateral to secure an ABL, so be sure to check with your lender to learn about their requirements. 

Is Asset-Based Lending Safe?

Since company assets back asset-based lending, it’s typically safer than unsecured lending. They also have lower interest rates the more liquid the asset is. However, there is always the risk of asset seizure if you’re unable to pay back your loan.

The best way to reduce risk when securing an asset-based loan is to select the right lender. Be sure to ask about the lender’s experience with your industry and specific assets and the lender’s background, including length of operation and funding. Also, make sure to evaluate if the return on investment is worth securing an asset-based loan.

Is ABL a Term Loan?

A term loan is any loan where the borrower receives a sum of money upfront with the agreement that they will repay the loan in installments over a fixed period. An asset-based loan is a type of term loan. 

Example of an Asset-Based Loan

A great way to start thinking about asset-based loans is home mortgages. When you mortgage a home, you have a repayment term and interest rate that determines your monthly payments. If you were to default on your mortgage, the lender might be able to repossess your home to cover the non-payment.

Asset-based loans in the trucking industry work in the same way. Trucking companies or owner-operators can take an asset-based loan typically backed by their commercial vehicles or trailers as collateral. The lender could then repossess the asset in the case of non-payment. 

Should You Consider Asset-Based Lending?

While asset-based loans can offer an influx of cash to businesses, they aren’t suitable for every company. Other cash flow solutions such as invoice factoring may better suit your company’s needs. To determine if an asset-based loan is the best choice in your situation, consider the following factors.

Company History

Your company’s ability to secure an asset-based loan largely relies on your company’s history. Background and credit checks are part of the ABL process, and lenders will also consider your company’s age and overall health. 


Most lenders prefer collateral for asset-based loans to be as liquid as possible. This means any assets that can easily be turned into cash in the case of loan default. Not everything will qualify as collateral, so be sure to confirm which assets you can use.

Trucking companies may be able to use their commercial vehicles for collateral. Other company assets commonly used as collateral include accounts receivable, inventory, real estate, and intellectual property. 


Asset-based loans are more flexible than other types of borrowing. This is because asset-based lending primarily focuses on the value of your business assets rather than more traditional cash-flow metrics. The company then has more flexibility to make decisions without the risk of unexpected changes in the business environment. 


There is a level of significant risk associated with ABL. Since a company’s most valuable assets are often used as collateral, loss of these assets due to non-repayment can be devastating. That’s why it’s vital to stay on top of payments. 

Interest Rates

Interest rates for asset-based loans vary widely from as low as 7% to as high as 30%. Since most asset-based lenders are alternative lenders, interest rates tend to be higher than what a business may be able to secure with a standard bank loan.

However, ABL interest rates are usually lower than with unsecured business loans since the lender’s risk is lower with collateral.

Advantages of Asset-Based Lending

There are several advantages to asset-based lending for businesses, including trucking companies and owner-operators. 

Quick Short Term Funding

Asset-based loans can be secured quickly and without excessive documentation. This is excellent for businesses that need nearly immediate funding as they may be approved and receive funds straight away. In addition, companies often seek asset-based loans to keep up with day-to-day operation costs where time is of the essence. 

Increased Cash Flow

During tough financial times, traditional bank loans are more challenging to secure, and banks may reduce lines of credit based on recent business performance. Companies can sidestep some of this business cycle volatility with an asset-based loan by leveraging solid assets for a much-needed influx of cash. 

Competitive Interest Rates

While asset-based loans typically do not offer as favorable interest rates as standard bank loans, they are lower than unsecured loans. Also, companies with good credit standing to secure favorable interest rates for asset-based loans. 


Many companies find asset-based loans more flexible than traditional bank loans. Since the loan is tied to assets rather than cash flow, they can expand their options when making business decisions without relying on current financials. 

Disadvantages of Asset-Based Lending

While there are many advantages to asset-based lending, it’s essential that businesses also consider the disadvantages of this type of loan. 

Risk of Losing Assets

Since a company must use its assets as collateral to secure an asset-based loan, there is a risk of losing them if it cannot repay the loan. Even more detrimental is that the assets typically leveraged for ABL are vital for business operations. 


Along with interest, an ABL borrower also may have to pay fees associated with their loans, such as origination, audit, and due diligence fees.


ABL lenders require monthly or even weekly reports on the status of the assets used as collateral. Many companies find this level of reporting inconvenient or even costly. 


As with increased reporting requirements, lenders also monitor businesses for asset-level fluctuations. Depending on the situation, these fluctuations may limit available capital. 

Asset-Based Loans for Trucking Companies

Trucking companies often need loans or financing to cover costs. Options such as asset-based loans and semitruck financing are especially suited for funding in the transportation industry. They can even help owner-operators start-up and expand their business. 

We are excited to announce the launch of, a revolutionary resource designed to transform how consumers choose auto-shipping companies. Check it out today!

TAFS is More than Freight Factoring

As one of the industry leaders, TAFS assists trucking companies to increase cash flow with some of the lowest factoring rates in the industry and a 1-hour advance option.