In today’s fast-paced and unpredictable business environment, some companies need more than just traditional loans to stay competitive – they need financing that is scalable and supports their growth goals. Asset-based lending (ABL) is a powerful tool available to help businesses with their working capital needs and seize opportunities – without sacrificing control.

Abbey Henderson, Senior Vice President, and Managing Director of Specialty Lending at Cogent Bank, puts it simply, “we turn business assets into fuel for growth.”

Asset-based lending provides a revolving line of credit backed by a company’s assets. As sales increase and receivables grow, availability on the credit line expands. When clients pay, the line pays down. It’s flexible for the client, transparent, and tailored to a company’s growth.

According to the Secured Finance Network, asset-based lending commitments reached $320 billion in the U.S. at the close of 2024, reflecting a steady increase in demand from companies seeking flexible alternatives to traditional financing.

Let’s look at how ABL works and discuss key parameters.

Collateral

Common assets include:

• Accounts receivable
• Inventory
• Equipment
• Unencumbered real estate
• Recurring revenue streams – on a case-by-case basis

These assets can support a wide range of capital needs, such as acquisitions, equipment purchases, bridge financing, and seasonal working capital. “We can roll all of that into one or multiple facilities,” Henderson says, “with covenants that allow for faster access to capital and liquidity.”

 ABL structures can also accommodate:

• Seasonal fluctuations in revenue
• Expansion plans and new product launches
• Unexpected opportunities or challenges

For example, a company preparing for a major product launch may need short-term liquidity to ramp up production and marketing. ABL can provide that cushion without requiring a long-term commitment or equity dilution.

Who’s a Good Fit For ABL?

ABL isn’t just for distressed companies – it’s also for healthy, growing businesses. Many thriving businesses choose ABL for its flexibility and scalability. Henderson encourages business owners to explore all capital options early, and on an ongoing basis as their needs evolve.

Frequent users include:

• Staffing Companies: to cover payroll between billing cycles, leveraging customer contracts as collateral.
• Manufacturers: use equipment, receivables, and contracts to fund operations and growth.
• Distributors: manage inventory turnover and meet spikes in demand.
• Service Providers: cover liquidity needs to cover inconsistent cash flow.

Take a healthcare staffing firm, for example. Typically, payroll is weekly – but customer payments may take weeks. ABL bridges that gap, providing liquidity based on expected receivables.

“ABL lets companies turn their balance sheet into a strategic growth tool,” Henderson explains.

ABL can also play a strategic role during transitions—such as mergers, buyouts, or leadership changes—when liquidity and agility are critical.

Automated Payment Process

Cogent simplifies the repayment process. Payments go into a Cogent account and are automatically swept into the credit line. The bank verifies incoming funds and invoice amounts, saving time and reducing risk.

“With an ABL shop inside a bank versus a private credit shop, cash movement is faster and automated,” Henderson says. “That level of transparency lets clients manage their borrowing base in real time and make smarter decisions about capital.”

Cogent’s integrated systems also reduce administrative burden, freeing up time for business owners to focus on growth and other important initiatives.

Navigating Supply Chain Challenges

Economic shifts like tariffs, inflation, or pandemic disruptions can impact a company’s inventory values and borrowing base. “We were flexible with borrowers who landed inventory early, before tariffs hit,” Henderson notes. “That made their inventory more valuable since the overall purchase price went up.”

Cogent also uses third-party data to track inventory values and adjust rates, thus helping clients stay ahead of market changes. This proactive approach is especially valuable in industries like manufacturing and retail, where supply chain volatility can have a significant impact on margins and liquidity.

Success Stories

Cogent recently helped a staffing and IT infrastructure company expand after landing a major government contract. Instead of diluting equity, Cogent increased their ABL facility to cover startup costs tied to hardware, tech, and personnel costs, funding against the value of the contract itself.

In another case, Cogent structured an acquisition financing package for a pharmaceutical manufacturer combining a term note with a revolving line of credit, despite the company being primarily cash-based with limited inventory.  

“We customized a solution that give them both the acquisition funding and the working capital they need to scale,” Henderson notes.

ABLs vs. Term Loans

Asset-based Lines of Credit offer more flexibility than traditional term loans:

• Borrowing ability is based on asset quality not historical performance.
• Less stringent repayment structures
  • Cash flow recapture structure allows for larger advances upfront.
  • Interest-only payments growth initially and during phases.
• Potential cost savings through efficient repayment and greater growth.

“Monthly payments are lower because we don’t require principal repayment right away,” Henderson explains. “That lets companies deploy capital where it drives the most value.”

Companies can also combine ABL with term loans – one for working capital, another for acquisitions or equipment. This hybrid approach allows businesses to tailor their capital stack to specific needs and growth stages.

“You can’t run a company the same way through every phase of its life cycle,” she says. “Surround yourself with good financial mentors. A good place to start is with your accountant. They will know who the quality financial partners are, including those in the secured finance arena such as Cogent.

Cogent’s Ideal Client

Cogent specializes in serving lower to middle-market companies with real working assets. These businesses value:

• Speed and transparency
• Building relationships with their financial partners
• Local decision-making
• Sponsor-backed acquisition platforms

“We fill a funding gap that larger banks often overlook,” Henderson says. “We execute well in helping companies grow and succeed – even if they eventually outgrow us. That’s the mark of doing our job right.”

Ready to Fuel Your Growth?

Asset-based lending isn’t just a financing tool—it’s a growth strategy. Whether you’re scaling operations, navigating market shifts, or exploring new opportunities, Cogent Bank is here to help.

Contact Cogent today to learn how ABL can support your next phase of success. 

Disclaimer: The information contained herein is for informational/educational purposes only. The views and opinions expressed in this document may be those of the individuals and may not necessarily reflect those of Cogent Bancorp and its subsidiaries and affiliates, or the entities they may represent. Content contained herein may be used in connection with the advertising and/or marketing of products offered by Cogent Bank or Cogent Private Wealth. The material is not intended to provide or substitute for legal, tax, or financial advice or to indicate the availability or suitability of any Cogent Bank product or service. You should consult with a legal, financial, tax, or other appropriate professional(s) for your specific needs and/or objectives before making any decisions.