The short version
- Asset based lending (ABL) is business finance secured against assets you already own: equipment, vehicles, invoices, stock or property.
- Lenders advance a percentage of the asset's value, typically 50-80%, so the asset sets the limit rather than a revenue multiple.
- That makes ABL accessible to businesses that fail a bank's serviceability test but hold real assets.
- It's usually cheaper than unsecured lending, because the asset lowers the lender's risk.
- The asset is the exit. If you can't repay, the lender can sell it, so ABL suits businesses confident in their cash flow.
Search "asset based lending" in Australia and half the results explain the American version, complete with US terms and US numbers. This is the Australian one: how asset based lending actually works here, which assets qualify, the loan-to-value ratios lenders use, what it costs against an unsecured loan, and when it's the right call.
Asset based lending (ABL, sometimes called an asset backed loan or an ABL loan) flips the usual question. Instead of "how much revenue can service this loan?", it asks "what do you own, and how much is it worth?". For an asset-rich business that a bank has knocked back on serviceability, that's a very different, and often better, conversation.
What counts as an asset
Most tangible business assets, and some intangible ones, can secure lending. What changes is how much a lender will advance against each, expressed as a loan-to-value ratio (LVR).
| Asset type | Typical LVR (indicative) | Speed |
|---|---|---|
| Commercial or residential property | Up to 70-80% | Days to weeks |
| Vehicles and equipment | 50-80% | Days |
| Unpaid invoices (receivables) | 70-90% advance | Days |
| Stock and inventory | 30-50% | Days to weeks |
| Cash and term deposits | Very high | Fast |
The pattern: the easier an asset is to value and sell, the higher the LVR. Property and receivables sit at the top because they're liquid and predictable. Stock sits lower, because a forced sale rarely recovers full value. When a lender advances against an asset, it typically registers its interest on the Personal Property Securities Register (PPSR), which is the Australian system that records who has a claim over what. That registration is a normal, expected part of the process.
ABL vs unsecured vs a bank term loan
The same business gets three different offers depending on the structure.
| Asset based lending | Unsecured loan | Bank term loan | |
|---|---|---|---|
| Security | The asset you pledge | None (director's guarantee) | Usually property |
| Sized on | Asset value and LVR | Revenue multiple | Serviceability + security |
| Typical rate | Lower than unsecured | Highest | Lowest, if you qualify |
| Approval basis | What you own | Recent trading | Full financial position |
| Speed | Days | Days | 2 to 6 weeks |
| Best for | Asset-rich, serviceability-light | No assets to pledge | Established, has time and security |
ABL sits in a useful middle. It's cheaper than unsecured lending because the asset lowers risk, and faster and more flexible than a bank term loan because it leans on the asset rather than a full financial workup. Note that "hard money lending", a term you'll see on US sites, refers to a similar asset-secured idea, but the Australian market and its rates work differently, so treat US figures with caution.
The asset is the exit. If you can't repay, the lender sells what you pledged, that's the entire basis on which the money is cheap. ABL is low-cost credit only for a business confident in its cash flow and its ability to repay. Pledging a core asset you can't operate without, against a repayment you're not sure you can meet, is how a cash-flow problem becomes a lost asset. Borrow against what you own, not against what you can't afford to lose.
Five real scenarios
The equipment-rich transport company. Owns $600,000 of trucks and trailers outright but was declined by a bank on serviceability. ABL against the fleet unlocks working capital the revenue alone wouldn't support, because the assets, not the cash flow, set the ceiling.
The property-backed urgent need. A business with equity in commercial property needs funds fast for a short window. A caveat loan, a fast, short-term facility secured by lodging a caveat over the property, can settle in days. It's expensive and strictly short-term, suited only to a genuine need with a clear exit (a dedicated guide on caveat loans is coming).
The invoice-backed wholesaler. $300,000 owed across 45-day invoices, cash tight now. Lending against those receivables (a form of ABL that overlaps with invoice finance) advances most of the value immediately. Factoring versus invoice finance covers the nuances of borrowing against invoices.
The stock-heavy retailer. Holds significant inventory and wants to fund a seasonal build. Stock can secure lending, but at a lower LVR, so it usually works best combined with another asset rather than on its own.
The business consolidating debt. Juggling several facilities, but owns real assets. Securing one facility against those assets can lower the overall rate and simplify repayments, consolidating the debt into something cheaper and cleaner.
What it actually costs
ABL pricing sits below unsecured lending and above prime bank rates, and the exact figure depends on the asset. A loan secured by property prices near the low end; one secured by stock, near the higher end, reflecting how easily each could be sold.
As a worked example, take a $200,000 machine owned outright. At a 70% LVR, a lender might advance $140,000 against it. You'd pay interest on the $140,000, plus establishment and often ongoing fees, and the lender registers its interest on the PPSR until you repay. Because the machine secures the loan, the rate is meaningfully lower than an unsecured $140,000 would attract, which is the whole point of using the asset.
Compare the ABL rate against what the same amount would cost unsecured, and weigh the saving against the risk you're taking on the asset. If ABL saves you several percentage points but puts a business-critical asset on the line, the rate isn't the only number that matters, your confidence in the repayment is.
What you need to qualify
ABL shifts the assessment from you to the asset, but the basics still apply: an active ABN, clear ownership of the asset (or enough equity in it), and a valuation the lender accepts. Because the asset carries the risk, trading-history and revenue requirements are lighter than for unsecured lending, which is exactly why asset-rich, serviceability-light businesses use it. The general requirements are here, and ABL relaxes the revenue side in favour of the asset side.
You can sometimes borrow against an asset you still owe money on, secured against the equity you hold in it rather than its full value, though the available LVR drops accordingly.
If the bank said no
A bank serviceability decline is the classic reason businesses turn to ABL. Banks lead with "can your cash flow service this?"; ABL leads with "what do you own?". A profitable-on-paper business with strong assets but lumpy cash flow can fail the first test and pass the second comfortably. There are genuine alternatives after a bank decline, and for an asset-rich business, ABL is often the most cost-effective of them.
If you own real assets but keep failing on serviceability, asset based lending is probably your cheapest path to funding. If you don't have assets to pledge, or can't afford to risk the ones you have, unsecured lending is the safer structure even at a higher rate. Match the finance to what you can genuinely put on the line.
Common questions
What assets can be used for a business loan in Australia?
Commercial and residential property, vehicles, plant and equipment, unpaid invoices, stock and inventory, and cash or term deposits can all secure business lending. Each carries a different loan-to-value ratio, property and invoices attract the highest advances, stock the lowest, based on how easily the asset can be valued and sold.
What LVR do asset based lenders offer?
It varies by asset. As indicative Australian norms: property up to around 70-80%, vehicles and equipment 50-80%, invoices 70-90% of their value, and stock typically 30-50%. The more liquid and predictable the asset, the higher the percentage a lender will advance against it.
Is asset based lending cheaper than unsecured lending?
Usually, yes. The pledged asset lowers the lender's risk, so ABL generally prices below an equivalent unsecured loan. The trade-off is that the asset is on the line if you can't repay, so the saving comes with real risk attached rather than for free.
Can I use equipment I still owe money on?
Sometimes, secured against the equity you hold in it rather than its full value. If you owe money on the asset, the amount you can borrow against it drops, because the existing financier already has a claim registered on the PPSR. A lender will assess your net equity in the item.
How fast can an asset based loan settle?
Often within days, particularly for vehicles, equipment or invoices, which are quick to value. Property-secured facilities can take a little longer if a valuation is required, but ABL is generally far faster than a bank term loan, because the assessment centres on the asset rather than a full financial review.
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