In today’s rapidly evolving healthcare landscape, businesses across the sector—from private clinics to medical device manufacturers—face constant financial pressures. Between delayed insurance reimbursements, rising operational costs, and the need for regular equipment upgrades, maintaining steady cash flow is an ongoing challenge. That’s where Asset-Based Lending (ABL) comes into play: a flexible and scalable financing solution tailored for asset-rich healthcare businesses.

In this article, we’ll break down exactly how ABL works, who it benefits, and how your healthcare business can prepare to take advantage of it.

What is Asset-Based Lending (ABL)?

Prêts basés sur l'actif is a type of business financing that allows companies to borrow money based on the value of their assets. Unlike traditional bank loans, which depend heavily on credit scores and cash flow, ABL gives more weight to collateral such as:

• Accounts receivable (A/R)

• Medical or laboratory equipment

• Inventory (like pharmaceuticals or medical supplies)

ABL can be structured either as a term loan or a revolving line of credit, depending on the company’s needs. This flexibility makes it especially attractive for businesses in healthcare that have strong assets but limited liquidity.

How Asset-Based Lending Works

Here’s how a typical ABL facility is structured:

1. Asset Evaluation: A lender assesses the value of your eligible assets, most commonly A/R and inventory.

2. Borrowing Base Calculation: A percentage of that asset value—called the advance rate—is used to determine your credit limit (e.g., 80% of accounts receivable).

3. Loan or Line Setup: The funds are made available as a line of credit that you can draw from as needed.

4. Ongoing Monitoring: The lender requires regular updates (monthly or even weekly reports) to track the performance of your collateral.

Example: A medical device distributor with $2 million in eligible receivables could secure up to $1.6 million in working capital (assuming an 80% advance rate).

Benefits of ABL for Healthcare Companies

• Increased Liquidity: Convert assets sitting on your balance sheet into cash for operations.

• Scalability: Your credit line grows as your assets grow—ideal for expanding businesses.

• Equity Preservation: Keep full ownership of your company while still accessing capital.

• Faster Access to Funds: ABL facilities can be approved and funded much more quickly than traditional loans.

Use Cases in the Healthcare Sector

Asset-based lending can support a wide range of healthcare businesses, including:

• Private clinics or group practices financing new diagnostic or surgical equipment.

• CDMOs (Contract Development & Manufacturing Organizations) who need cash flow to fulfill large contracts while waiting for milestone payments.

• Pharmaceutical wholesalers or lab supply distributors who carry large inventories and have payment terms of 60-90 days.

For a deeper dive into healthcare equipment financing, check out our article:
👉 Le guide ultime du crédit-bail d'équipements médicaux pour les pratiques médicales

Key Considerations Before Choosing ABL

While ABL can be a powerful tool, it’s not for every business. Here are a few things to keep in mind:

• Asset Quality Matters: Your accounts receivable must be from creditworthy clients and not overly aged (usually under 90 days).

• Costs and Fees: ABL may include due diligence, monitoring, and interest fees that can add up.

• Operational Readiness: You’ll need good bookkeeping and transparent reporting processes to maintain compliance with your lender.

• Leverage Risk: As with any credit facility, it’s important to ensure your business isn’t overextending itself.

How to Prepare for an ABL Facility

To make sure your business is ready for asset-based lending, follow these best practices:

• Update Your Financial Statements: Make sure your income statement and balance sheet are current and accurate.

• Organize Your AR Aging Report: This shows the breakdown of your receivables and how long they’ve been outstanding.

• Catalog Your Assets: Include serial numbers, depreciation schedules, and resale values if possible.

• Work with Industry-Savvy Lenders: Choose financing partners that understand the healthcare space—this ensures they properly value your assets and move quickly.

Final Thoughts

Asset-based lending is a dynamic and underutilized financing tool in the healthcare industry. If your business has substantial receivables, equipment, or inventory but is struggling with short-term liquidity, ABL may be the answer. It allows you to grow faster, operate smoother, and protect your equity—without jumping through the hoops of traditional lending.

Interested in exploring whether ABL is right for your business?
👉 Contact Finmed Capital today for a free consultation.