Asset-based lending (ABL) presents a diverse number of use cases for companies looking for a financing solution that is outside the traditional banking fold. Whether it’s for a lower middle-market business in transition, or a financial sponsor looking to finance an acquisition, ABL offers the flexibility to meet diverse needs.
Financing in today’s ever-changing lending market requires finding creative solutions that align available capital with the specific transaction type. The strength of ABL financing is that, unlike a cash-flow structure that traditional lenders typically follow, asset-based loan facilities rely on the quality and value of the company collateral, allowing some flexibility for fluctuations in financial ratios or performance.
Whether it’s a manufacturer or distributor, a service company or e-tailer, there are several industry scenarios that may drive the need for this alternative form of financing. Below are a couple real-world examples from our financing history to illustrate the diverse use cases for this financing vehicle.
Steel Fabricator Achieves Improved Liquidity with $5MM ABL
Building and sustaining a manufacturing business often means overcoming challenging market forces, any one of which can disrupt cash flow or require a capital investment. One GBC partner, Ideal Steel sought a financing partner that could provide a flexible structure and improved liquidity as they streamlined their operations for future growth.
GBC was able to support this goal through an asset-based lending soltuion without adding restrictive covenants and while also providing some flexibility to shareholders during the transition.
Sponsor-Backed Farm Supply Company Secures $20MM Acquisition Financing
With access to GBC’s ABL credit facility, the CriticalPoint Capital team was able to complete the acquisition of the assets of a farm supply company and re-brand the carve-out as Agway Farm & Home.
In this transaction, GBC dug deep into the new company’s accounts receivable and provided flexibility in the inventory valuation requirements in creatively structuring the borrowing base availability. In addition, GBC provided unique financial covenant flexibility to support the transaction. All these factors ensured an expeditious and successful acquisition closing.
These are just a couple examples to demonstrate the utility of asset-based lending as a financing vehicle. There are many more available in the case studies section of our website.
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