Are Asset-Based Business Loans Right for Your Company?

Growing a business is never simple, especially when your momentum outpaces your working capital. For some rapidly growing companies, traditional bank loans and other financial loans can fall short, limiting your borrowing power and flexibility right when you need them most. That’s why choosing the right financial partner is essential to sustaining and accelerating growth.

Asset-based lending (ABL) can be a smart strategy for companies experiencing higher-than-expected sales growth. This sales growth will almost always lead to fast growth in short-term assets such as accounts receivable and inventory. ABL loans can help unlock working capital and support the expansion. But is an asset-based business loan the right move for your company?

At Scale Bank, we specialize in helping vision-driven entrepreneurs and established companies grow beyond the ordinary. Let’s explore the role of ABL in modern commercial financing and see whether it aligns with your goals.

When to Consider an Asset-Based Loan

Understanding Rapid Growth and Other Circumstances That Create the Need for an Asset-Based Loan

Rapid growth occurs when your business transitions from steady progress to a period of accelerated expansion, marked by surging sales, new markets, or scaling operations faster than anticipated. While this momentum is exciting, it often presents a host of challenges, including meeting rising demand, hiring and training talent, managing supply chains, and staying ahead of cash flow.

Beyond the demands of growth itself, other situations can create an immediate need for additional working capital. Unexpected significant expenses, such as emergency repairs, can strain even the healthiest balance sheets. Partner buyouts, restructuring, or sudden regulatory changes may require significant funds on short notice. And sometimes, the right market opportunity appears, but only if you can act quickly to secure it.

In all these scenarios, commercial lending solutions like asset-based loans can provide the flexible financing you need to keep growing without losing your momentum.

The Role of Working Capital

Working capital is the lifeblood of your business. It keeps day-to-day operations moving, covering everything from payroll and rent to inventory purchases and supplier payments. For any growing company, having dependable access to working capital isn’t optional; it’s essential.

As your business expands, so do your funding needs. You may need to offer extended payment terms to your clients, purchase larger volumes of inventory, or hire new employees to keep pace with demand. Without the right financial resources, even established organizations can find themselves stretched too thin. That’s where bank loans and flexible commercial financing solutions come in, helping you bridge gaps and keep your plans on track with confidence.

Asset-Based Lending as a Solution

Asset-based lending is a type of business bank loan that allows you to unlock the value of what you already own. Rather than relying solely on your credit profile or future projections, an asset-based loan is secured by short-term assets such as accounts receivable and inventory. As these assets grow, so does your borrowing capacity, providing you with a line of credit that scales in line with your business.

One of the core advantages of this approach is the ability to leverage your receivables or inventory to access working capital without waiting for invoices to be paid. This liquidity helps you cover everyday expenses, fund payroll, and seize opportunities without disrupting your operations.

For companies experiencing rapid expansion or operating with thinner capitalization, asset-based lending can be a practical tool to maintain smooth operations and support growth. As part of your commercial banking strategy, it can complement other business loan options and strengthen your financial foundation.

Asset-Based Lending vs. Other Business Loan Options

Here’s how asset-based loans compare to other common financial loans:

While a term loan might fund a single large investment, an asset-based line of credit adjusts with your company’s performance, creating more agility for dynamic operations.

Finding the Right Asset-Based Lender

Not all lenders are created equal, especially when you’re navigating the complexities of commercial financing. It’s important to work with a lending bank that understands the unique challenges and opportunities your business faces. The right partner will look beyond the numbers and take the time to learn what drives your company forward.

When evaluating asset-based lenders, consider a few key criteria. Look for teams with proven experience and expertise in your industry, as this will enable them to offer informed guidance. Prioritize flexibility and ongoing support; you want a lender who can adapt as your business evolves rather than a one-size-fits-all approach. And above all, ensure that you have clear and transparent information about fees and costs, so there are no surprises down the road.

With the right relationship, asset-based lending becomes more than just a financial tool; it becomes a catalyst for sustainable growth and a vital part of your broader commercial lending strategy.

Partner with Scale Bank

For more than 50 years, Scale Bank has been helping business owners build momentum and grow beyond the ordinary. Based in Edina, MN, we understand what it takes to run a capital-intensive business and how to tailor solutions that fit your goals. Whether you’re navigating expansion, exploring new business loan options, or managing unexpected challenges, our team is here to help you unlock the value of your assets with clarity and confidence.

Let’s talk about how an asset-based loan can support your growth and why Scale Bank is the commercial financing partner you can trust.