Asset-based lending

How does asset-based lending work for a trucking or logistics business?

An ABL facility is usually a revolving line. The lender sets a borrowing base: the most you can have outstanding at any time, calculated as a percentage (the advance rate) of the collateral that qualifies (the eligible collateral). As you invoice loads, eligible receivables go up and so does availability. As brokers and shippers pay, the payments come in and pay the line down, and you can draw again.

A typical cycle for a carrier or broker:

1. You deliver loads and invoice your customers.
2. You report your receivables to the lender, often with a borrowing base certificate and an aging report, weekly or monthly depending on the agreement.
3. The lender recalculates availability and you draw what you need.
4. Customers pay into an account the lender controls or can take control of (a lockbox or collateral account), and those payments reduce the balance.

Not every receivable counts. Lenders commonly exclude invoices that are too old, amounts owed by affiliates, balances above a concentration limit for a single customer, and unbilled work. For a broker or carrier, that means a big chunk of business with one shipper or one slow-paying broker may count for less than you'd expect.

How ABL differs from factoring and AR financing. All three turn receivables into cash, but they work differently:

• Factoring is a sale. The factoring company buys specific invoices, usually verifies them, and often collects from your customer directly.
• Accounts receivable financing is a loan or line secured by your receivables. You usually keep collecting from your customers.
• Asset-based lending is a broader secured facility. It usually starts with receivables but can also count equipment, inventory, or real estate, and it comes with a fuller set of reporting, field exams, and collateral controls. It's typically sized for larger operations.

What can be used as collateral, and what does ABL fund?

Collateral, roughly in the order lenders tend to value it:

• Accounts receivable. The core of most ABL borrowing bases. Freight invoices to creditworthy brokers and shippers.
• Equipment. Tractors, trailers, wreckers, and shop equipment, usually valued by appraisal at what they'd bring in an orderly sale. Equipment often supports a fixed term piece alongside the revolving line.
• Inventory. Parts inventory for a repair shop or a fleet with its own maintenance operation. Usually advanced at a lower rate than receivables.
• Real estate. A terminal, yard, or shop. Usually a smaller, separate piece of the facility.

Typical structures:

• A revolving line against receivables (and sometimes inventory) for working capital
• A term loan against equipment or real estate, bundled into the same facility
• Occasional over-advances above the borrowing base, for a limited time, if the lender agrees

Common uses: covering payroll and fuel while receivables are outstanding, paying carriers before shippers pay (for brokers), funding growth, refinancing other debt, or buying out a factoring arrangement.

What affects the cost and availability of an ABL facility?

ABL pricing usually combines an interest rate (a spread over a benchmark) with fees, such as a commitment or unused-line fee, field exam fees, appraisal fees, and sometimes collateral monitoring fees. Some agreements adjust the rate or fees based on performance. Ask for every fee in writing and how often it applies.

What moves the cost and the amount available:

• Quality of your receivables. Who owes you, how fast they pay, and how concentrated the book is. Slow-paying or concentrated accounts lower availability.
• Size and steadiness of the operation. ABL has real setup and monitoring costs, so it tends to fit businesses with a larger receivables base.
• Clean books. Lenders rely on your aging reports and financials. Accurate, timely reporting matters more here than in most financing.
• Existing liens. A factoring company, equipment lender, or MCA provider may already have a lien on your receivables or equipment. Those usually have to be paid off or subordinated.
• Covenants. ABL lenders lean more on collateral reporting than on financial ratios, but many agreements still include a fixed charge coverage test, a minimum availability requirement, or limits on capital spending.
• Cash control. Many agreements give the lender full control over collections, or the right to take control if availability drops below a set level (sometimes called springing dominion).

Advance rates, fees, and covenants are set by each lender. We don't publish them.

Who in trucking and logistics typically uses asset-based lending?

• New authority: Rarely a fit. There's usually not enough receivables history or collateral yet. Factoring is the more common starting point.
• Small fleets: Established fleets with a growing receivables book and owned equipment, especially those outgrowing factoring or wanting to combine receivables and equipment into one facility.
• Couriers: Larger courier and final-mile operations with contract receivables from shippers or retailers.
• OTR and local haul: Carriers with dedicated or contract freight and steady direct-shipper receivables.
• Brokers and dispatchers: One of the most common users. Brokers often have large receivables and few hard assets, and they pay carriers before shippers pay them. A receivables-based line fits that gap. Dispatch services usually don't carry enough receivables.
• Towing and repair: Larger shops and towing operations with receivables from motor clubs, insurers, or fleet accounts, plus equipment and parts inventory.