BLUE COLLAR CFOsBoots before spreadsheetsAn ABL application is easy to get. The right bank is not.
Asset-based lending for trucking, construction, excavation, oil & gas and manufacturing companies. We match the company to a bank that fits its risk, build the file before the bank sees it, and make sure the covenants hold up in a bad month.
What asset-based lending is
An asset-based line of credit, or ABL, is a revolving loan secured by what the business owns: mainly its receivables, and sometimes its inventory. How much you can borrow moves with your eligible collateral, which you report to the bank on a set schedule. For an asset-heavy company it is often the step up from factoring. You collect your own receivables, draw what you need, and pay the line down as customers pay.
The first yes is usually not the best one.
Just about every bank nowadays will give you an application for an ABL. You might even get a term sheet, or a pre-term sheet. That does not mean it is going to work out. Each bank carries its own risks, and in this economy one bank will look at the same company very differently from the next.
A trucking company should not have an ABL with an oil and gas bank. Could it happen? Absolutely. But it is probably not the best fit, it probably does not have the best rate, and the covenants can be difficult to live with.
Knowing which bank fits the risk of your company is the whole game.
Signs it is time to look
- You are factoring and want the freedom of a bank line
- Your customers are creditworthy and pay on terms
- Your books are CPA-prepared and close every month
- You can show the business makes money
- A bank has sent you an application or a term sheet
- Your current line's covenants are getting tight
Fit the bank. Build the file. Test the covenants.
Match the bank to the risk
Our team came up on the factoring and asset-based lending side. We know which banks are lending in your industry, at your size, and which one is going to fit the risk of your company. Not twenty banks. The right two or three.
Build the file first
Financial statements, A/R and A/P agings, customer concentration, a debt and lien schedule, and a borrowing base that holds up to a field exam. We underwrite the file ourselves and take it straight to the lender's portfolio team, credit committee or final underwriting.
Test the covenants
We run every covenant against the same test we use on every deal: what happens if revenue drops 20% next month. If a covenant breaks on paper, we fix the structure or find a different bank before you sign.
Receivables on the line. Equipment on its own paper.
An ABL is usually secured by receivables and inventory, and some banks will add equipment to it. More often, trucks, trailers and heavy equipment are financed separately by lenders who specialize in them. The two have to be set up so they do not trip over each other: who holds a lien on what, and whether the bank's documents leave room for the next equipment note. Get that wrong and the next truck you need cannot be financed.
Straight answers.
Why would a bank give me a term sheet and then decline?
Because a term sheet is not an approval. It still has to get through credit, a field exam of your books and receivables, and the loan documents, and every bank has its own risk appetite. Often it comes down to fit: the company was never a good match for that bank's book.
Can a trucking company get an ABL?
Yes. Freight receivables from creditworthy shippers and brokers are collateral banks understand. The question is which bank. A bank that lends to trucking every day will look at your receivables very differently from one that mostly lends to energy or real estate.
What does a bank need to see for an ABL?
CPA-prepared year-end statements and monthly numbers, tax returns that tie to them, clean A/R and A/P agings, who your biggest customers are, a schedule of every loan, lease and lien, and a business that makes money. If you are factoring, the bank also needs a plan to pay off the factor and release its lien.
Which banks do you work with?
We do not name them on this site. Our team works with a private network of banks, and which one fits depends on your industry, your size and your risk. Part of the work is telling you which banks to skip.
Can I get off factoring if my books are not clean yet?
Usually not with a bank. Banks lend on statements they can rely on. If your books are not there yet, that is the first project, and it is the kind of cleanup our fractional CFO work covers.
Already holding a term sheet?
Send it over before you sign. We will tell you whether that bank fits, what the covenants will do to you in a bad month, and what we would change.