Asset-based lending (ABL) is a form of financing where a business secures a loan using its assets as collateral. These assets can include accounts receivable, inventory, equipment, vehicles, real estate, or even intellectual property. In the context of mergers and acquisitions (M&A), ABL allows businesses to unlock capital from these assets to fund acquisitions, support integration, or drive growth, without needing to raise equity or use existing cash reserves

Complexity in structuring: ABL deals require careful structuring and assessment of asset quality.

Ongoing reporting and monitoring: Lenders may require frequent audits or monitoring of the asset base.

Limited leverage: Not all assets are fully fundable—loan amounts depend on asset type, quality, and liquidity.

Not suitable for all businesses: Companies without strong, tangible assets or receivables may not qualify

Asset-based lending works by allowing a business to release cash against the value of its own assets, or even the assets of an acquisition target during an M&A deal. Lenders extend a loan based on a percentage of the assets' liquidation value, with those assets acting as security. This financing can be used to pay for the acquisition, fund integration, or boost ongoing operations. ABL is particularly attractive because it preserves equity ownership while enhancing return on investment by using leverage