Why Companies Choose Asset Based Lending in 2026

But that does not mean it is always the best fit. As private credit markets have matured and capital partner appetites have become more granular, asset-based lending has moved from a niche instrument to a mainstream funding tool for businesses whose balance sheets hold tangible value. Companies increasingly choose asset-based lending because it may offer flexible capital linked to receivables, inventory, equipment, vehicles, or specialist assets when unsecured facilities are not the right fit. 

At Fuse Capital, we see this in the conversations we have with borrowers and across our global network of more than 1,500 capital partners. The right structure is rarely determined by one asset or one headline rate; it depends on the relationship between the assets, cash flow, funding purpose, and wider growth plan. 

The sections below explore the questions CFOs commonly ask about asset-based lending, from how it works and when it can be useful to how lenders assess different assets. Drawing on our experience advising businesses and working with capital partners across the UK, Europe, and APAC, we unpack the nuances that sit behind the headline concept. 

The Main Reasons Companies Consider Asset-Based Lending 

• Asset-based lending secures funding against receivables, inventory, equipment, vehicles, or specialist assets rather than relying solely on cash flow. 

• Borrowing capacity may scale automatically as asset values grow, making it well suited to seasonal or high-growth businesses. 

• Fuse Capital helps mid-market CFOs compare terms across a global network of capital partners to identify the right facility structure. 

• Specialist funds may now finance non-traditional assets, though eligibility criteria and advance rates vary between capital partners. 

• Planning capital requirements early, before funding becomes urgent, may improve terms and expand the range of available structures. 

What Is Asset-Based Lending and How Does It Work? 

Asset-based lending is a form of secured business financing where a company borrows against the value of its tangible balance sheet assets. The facility is typically structured as a revolving credit line or term loan, with borrowing capacity determined by periodic valuations of eligible collateral. 

Common asset classes used as security include accounts receivable, inventory, plant and machinery, vehicles, and commercial property. According to UK Finance, invoice finance and asset-based lending facilities collectively fund well over £20 billion to tens of thousands of UK businesses at any given time. 

The borrowing base is dynamic. As receivables grow or inventory levels increase, available credit may expand. When asset values contract, the facility adjusts accordingly. That mechanism means a company's access to capital tracks its operational activity rather than remaining fixed against a historical earnings multiple. 

This is where asset-based lending and cash flow lending diverge. Cash flow facilities underwrite future profitability, typically using EBITDA multiples and maintenance covenants. Asset-based facilities underwrite collateral value, often with fewer financial covenants and greater structural flexibility during periods of earnings volatility.

Why Do Mid-Market Companies Choose Asset-Based Lending? 

The reasons vary by situation, but several patterns emerge consistently across mid-market transactions. 

Businesses with strong asset bases but variable earnings may find asset-based structures more accommodating than cash flow facilities. A manufacturing company with substantial receivables and raw materials, for example, could access a larger facility relative to its EBITDA than a traditional corporate loan would allow. 

Seasonal businesses benefit from the revolving nature of many asset-based facilities. A retailer building inventory ahead of peak trading may draw down more heavily during that period, then reduce utilisation as stock converts to receivables and cash. The facility flexes with the business cycle rather than imposing a static credit ceiling. 

Companies undergoing transitions, whether acquisitions, restructurings, or ownership changes, may also find asset-based lending attractive. During periods when cash flow metrics are temporarily disrupted, collateral value may remain stable or even increase. 

Asset-based facilities may serve a broad range of corporate purposes. The most common applications include the following. 

• Working capital management: Smoothing cash conversion cycles, funding payroll, and managing supplier payment terms during periods of growth or seasonal demand. 

• Capital expenditure: Financing equipment purchases, fleet expansion, or facility upgrades by borrowing against existing machinery or newly acquired assets. 

• Acquisition funding: Supporting bolt-on acquisitions where the target company's receivables or inventory may be incorporated into the borrowing base post-completion. 

• Refinancing: Replacing existing facilities with a structure that may offer greater flexibility, a lower cost of capital, or fewer restrictive covenants. 

• Growth financing: Scaling operations into new geographies or product lines where working capital requirements expand ahead of revenue. 

In each case, the facility is designed to expand alongside the business rather than requiring renegotiation each time capital needs change.

How Does Asset-Based Lending Compare with Unsecured Debt? 

Unsecured corporate loans and overdrafts rely primarily on the borrower's creditworthiness, cash flow history, and projected earnings. These facilities may be simpler to arrange for businesses with strong, predictable profitability and clean balance sheets.

Asset-based lending, by contrast, anchors borrowing capacity to collateral value. That distinction matters for several reasons.

• Advance rates and facility size: Asset-based facilities may offer higher borrowing limits relative to the balance sheet because the capital partner's risk is mitigated by tangible security.
• Covenant structure: Many asset-based facilities use borrowing base mechanics rather than EBITDA maintenance covenants, which may offer greater headroom during periods of earnings fluctuation.
• Cost of capital: Because the facility is secured, interest margins on asset-based lending may be lower than on equivalent unsecured facilities, though arrangement fees and monitoring costs should be considered in the total cost calculation.
• Flexibility during volatility: Businesses experiencing rapid growth, margin pressure, or transitional earnings disruption may retain access to capital through their asset base even when cash flow metrics would restrict unsecured borrowing.

Neither structure is inherently superior. The commercially optimal choice depends on the business's asset profile, earnings trajectory, strategic plans, and risk tolerance. A CFO evaluating both options should model the total cost of capital across different scenarios rather than comparing headline interest rates alone.

How Does Asset-Based Lending Compare with Equity? 

Equity financing and asset-based lending address fundamentally different capital needs, but mid-market CFOs increasingly consider both as part of the same capital structure conversation.

Equity dilutes ownership. Every share issued to an external investor reduces the founding team's or existing shareholders' proportional stake and may introduce new governance requirements. For owner-managed businesses, that trade-off carries strategic weight beyond the immediate capital need.

Asset-based lending preserves ownership. The capital is repaid with interest over time, and control of the business remains with the existing shareholders. For companies with assets that may support a facility, this may be the more capital-efficient route to fund growth, acquisitions, or operational expansion.

The distinction becomes particularly relevant when a business needs capital for a defined purpose, such as purchasing equipment, funding an acquisition, or building inventory. Issuing equity for short-term or cyclical needs may be unnecessarily expensive in the long run. An asset-based facility, structured against the acquired or existing assets, could address the requirement without permanent dilution.

Can Specialist Assets Be Used for Asset-Based Lending? 

Historically, asset-based lending facilities in the UK focused on receivables, inventory, and standard commercial equipment. That scope has broadened. 

Specialist funds and alternative capital partners may now finance assets that were not traditionally used as collateral for secured facilities. These could include technology hardware, vehicles, intellectual property, or sector-specific equipment. However, eligibility criteria, advance rates, and monitoring requirements vary significantly between capital partners and asset types. 

A fleet of electric vehicles, for instance, may be valued and financed differently from a debtor book. The appraised liquidation value, the secondary market for those assets, and the depreciation profile all influence the terms a capital partner is prepared to offer. 

This is where having access to a broad network of capital partners becomes important. A single institution may not finance a particular asset class, while another may have deep expertise in exactly that sector. Fuse Capital's asset-based funding advisory helps companies identify which capital partners have appetite for their specific asset profile, rather than approaching the market without that intelligence. 

The Dott Example: Asset-Based Lending for Micro-Mobility 

Dott, a European electric scooter-sharing platform, illustrates how asset-based lending may fund non-traditional asset classes at scale. 

The company needed to expand its fleet across multiple European cities. Traditional cash flow lending was not a natural fit for a high-growth, capital-intensive business operating in a sector without long credit histories. Equity alone would have meant significant dilution at a critical stage of growth. 

Instead, Dott structured a £10 million asset-based facility using its fleet of electric scooters as collateral. The Fuse Capital Dott case study documents how the advisory process helped identify capital partners with appetite for micro-mobility assets, then structured a facility that scaled alongside fleet expansion. 

That transaction demonstrates a broader principle. When a business owns assets with identifiable value, even if those assets are unconventional, there may be a capital partner willing to fund against them. The challenge is finding that partner and structuring terms that align with the business's growth trajectory. An independent debt adviser, such as Fuse Capital, can run a competitive process across its network to surface those options. 

Why Timing and Preparation Matter in Asset-Based Lending 

One of the most common mistakes mid-market CFOs make is waiting until capital is urgently needed before exploring asset-based facilities.

Capital partners assess risk more favourably when a business approaches the market from a position of relative strength. Financial reporting is up to date. Asset registers are clean. Receivables ageing profiles are well managed. Those conditions give the advisory team more to work with and may result in better advance rates, lower margins, and more flexible covenant packages.

When funding becomes urgent, the negotiating dynamic shifts. Fewer capital partners may be willing to engage on accelerated timescales, and the terms on offer may reflect the compressed timeline rather than the underlying quality of the collateral.

Planning ahead does not mean committing to a facility before it is needed. It means understanding the options, preparing the data, and building relationships with potential capital partners so that the business can move decisively when the right moment arrives. Fuse Capital's private credit advisory process is designed to support that kind of preparedness, running structured assessments of a company's borrowing capacity well ahead of any immediate funding requirement.

What Should a CFO Consider Before Exploring Asset-Based Lending? 

Before approaching the market, a CFO should evaluate several factors.

• Asset quality and documentation: Are the company's receivables, inventory, and equipment well documented, regularly valued, and free from existing charges that could complicate a new facility?
• Reporting readiness: Asset-based facilities typically require periodic borrowing base certificates and asset reports. The finance team should be prepared for the operational demands of ongoing monitoring.
• Total cost of capital: Compare the all-in cost, including arrangement fees, monitoring charges, and interest margins, against alternative structures rather than focusing on headline rates.
• Strategic alignment: Does an asset-based facility support the company's medium-term plans? A facility that constrains future acquisitions or restricts dividend payments may not be the right structure, even if the cost of capital is attractive.
• Adviser selection: An independent debt adviser who can access multiple capital partners may identify structures and terms that a single-institution approach would miss. Fuse Capital's network spans over 1,500 capital partners across the UK, Europe, and APAC, enabling a competitive process that helps surface the commercially optimal outcome.

In Conclusion: Asset-Based Lending as a Strategic Capital Tool 

Asset-based lending is not a last resort. Increasingly, it is a deliberate strategic choice for mid-market businesses whose balance sheets hold tangible value.

For CFOs evaluating capital options, the question is whether the business's assets can support a facility that offers greater flexibility, potentially lower cost, and scalability that cash flow lending or equity may not match. The answer depends on the specific asset profile, the quality of financial reporting, and the range of capital partners considered.

The most effective approach is to explore these options early, before funding becomes urgent, and with access to a broad enough network to ensure a truly competitive process. Fuse Capital's asset-based funding advisory is built to support that process, helping mid-market companies compare structures, terms, and capital partners so that the final facility reflects a well-prepared, considered decision rather than a pressured one.

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FAQs About Why Companies Choose Asset Based Lending in 2026

What types of assets can a business use for asset-based lending?

Businesses may borrow against accounts receivable, inventory, plant and machinery, vehicles, commercial property, and in some cases specialist equipment or technology hardware. Eligibility and advance rates depend on the asset class and the capital partner's appetite.

Is asset-based lending only for businesses in financial difficulty?

No. Many profitable, growing companies choose asset-based lending because it may offer greater borrowing capacity, more flexible covenants, and potentially lower costs than unsecured alternatives. Fuse Capital regularly advises healthy mid-market businesses exploring expansion funding through asset-based structures.

How does Fuse Capital help with asset-based lending?

Fuse Capital acts as an independent debt adviser, not a capital partner. The firm runs a competitive process across a network of more than 1,500 capital partners to identify the right structure, terms, and pricing for each business. That approach helps CFOs access options they may not find through a single-institution relationship.

How quickly can an asset-based facility be arranged?

Simple facilities may close in a matter of weeks. More complex structures involving multiple asset classes, cross-border elements, or higher facility values typically require additional due diligence and could take several months. Early preparation and clean financial data may help accelerate the process.