Asset-based lending vs revolving credit facility
Both asset-based lending and a revolving credit facility let a business draw and repay funds; asset-based lending sizes availability against debtors, stock, plant and property, while an RCF offers a committed limit tested by financial covenants. This guide sets out how the structures differ and what to compare.
The short answer
ABL availability comes from a borrowing base of business assets. An RCF provides a committed credit line up to an agreed limit. Both let a business draw, repay and redraw.
Asset-based lending and a revolving credit facility both provide revolving access to capital. The distinction in this guide is how availability is established: an ABL borrowing base relates to a pool of business assets, while an RCF is a committed limit for an agreed term.
These are descriptions of the facilities, not promises that a business will qualify. The quotations below are indicative, subject to status. A comparison of the borrowing base, committed limit, security and covenants is more useful than assuming the two names describe identical arrangements.
| Comparison point | Asset-based lending | Revolving credit facility |
|---|---|---|
| Sized by | Borrowing base of debtors, stock, plant and property, following an asset audit. | An agreed committed limit. |
| Scales with growth | As the asset base grows, availability increases automatically, without renegotiating the facility. | A committed limit for the agreed term. |
| Interest basis | Interest is charged only on drawn amounts. | Interest is charged only on drawn amounts; a commitment fee may apply to undrawn amounts. |
| Typical fit | Asset-rich businesses; growth, acquisition or MBO; businesses that have outgrown invoice discounting. | Profitable businesses with predictable cash flows; seasonal needs, overdraft replacement or standby liquidity. |
Indicative terms
| Product | Feature | Indicative figure |
|---|---|---|
| Asset-based lending | Interest rate | 2–4% over base rate on drawn amounts |
| Typical facility size | Typically £2m+ (mid-market) | |
| Advance rate (debtors) | 85–90% of eligible debtor book | |
| Advance rate (stock) | 50–60% of eligible stock | |
| Advance rate (property) | Up to 70% LTV | |
| Revolving credit facility | Interest rate | 2–5% margin over SONIA on drawn amounts |
| Commitment fee | 30–50% of margin on undrawn amounts | |
| Arrangement fee | 0.5–2% of facility size | |
| Typical facility size | From £250k with mainstream lenders | |
| Facility term | 12 months to 5 years |
Asset-based lending
- Interest rate
- 2–4% over base rate on drawn amounts
- Typical facility size
- Typically £2m+ (mid-market)
- Advance rate (debtors)
- 85–90% of eligible debtor book
- Advance rate (stock)
- 50–60% of eligible stock
- Advance rate (property)
- Up to 70% LTV
Revolving credit facility
- Interest rate
- 2–5% margin over SONIA on drawn amounts
- Commitment fee
- 30–50% of margin on undrawn amounts
- Arrangement fee
- 0.5–2% of facility size
- Typical facility size
- From £250k with mainstream lenders
- Facility term
- 12 months to 5 years
All figures are indicative and subject to status.
How ABL works
Asset-based lending is a revolving facility secured against a combined pool of debtors, stock, plant and property. It brings multiple asset classes into one structured facility rather than relying on a single asset class.
The lender audits the assets, assigns advance rates and calculates a combined borrowing base. The exact indicative quotations above describe debtors, eligible stock and property. They are not an eligibility guarantee or a promise of the terms available to your business.
Asset audit
The lender conducts a detailed audit of the debtor book, stock, plant and property.
Advance rates assigned
Rates are assigned to the asset classes. The indicative figures are shown above, subject to status.
Borrowing base calculated
A combined borrowing base is established and a revolving credit line opened up to that amount.
Draw and repay
Draw as needed and repay as cash flows allow. Interest is charged only on drawn amounts.
Facility scales
As the asset base grows, availability increases automatically, without renegotiating the facility.
How an RCF works
A revolving credit facility is a committed, flexible credit line for an agreed term, without fixed drawdown schedules. Funds are available up to the agreed limit during the facility, rather than being a fixed loan for one defined purpose.
Interest is charged on the amount drawn, not the whole facility. A commitment fee may apply to undrawn amounts, and an arrangement fee may also apply. These fee bases are distinct; paying interest only on drawings does not mean every other charge disappears.
Facility committed
The lender commits to making funds available up to a set limit for an agreed term.
Draw when needed
Draw funds as required. Interest is charged only on the amount drawn.
Repay when cash allows
Repayments are flexible and repaid funds return to availability.
Redraw
Repaid amounts are available to redraw and the facility revolves throughout its term.
Covenants tested
Financial covenants typically include leverage and interest cover, tested quarterly.
Which suits your business?
These are qualitative examples, not turnover, trading-history or order-size requirements. All finance is subject to status and provider criteria. This guide does not promise that either route will be available to a particular applicant.
Asset-based lending may suit businesses with a mix of debtors, stock and property on the balance sheet; asset-rich businesses wanting to unlock capital from multiple sources in one facility; and businesses that have outgrown standalone invoice discounting.
It may also suit businesses undergoing significant growth, acquisition or a management buyout (MBO) that need a scalable facility. Availability follows the asset pool.
A revolving credit facility may suit profitable businesses with predictable cash flows, seasonal or cyclical working capital requirements, and companies looking to replace or supplement an overdraft. It can also provide standby liquidity for near-term acquisition or investment plans.
The illustrative facility-size quotations describe the products, not qualifying criteria for your business. The RCF term quotation is a product term, not a promise of decision or funding speed. Timescales depend on the lender and the deal.
Why use a broker to compare them
Oku Financial is independent, with no balance sheet to protect and no product to push. We design the deal before approaching lenders: size, tenor, security and covenants. That lets the borrowing base or committed limit be considered alongside the requirement.
We approach the right lenders simultaneously, creating genuine competition and compressing timelines. This is the existing Fast pillar, not a fixed approval timescale or a guarantee of finance.
Try the finance finder
The finance finder provides an indicative starting point based on what you need the money for and how your balance sheet is described. Read the ABL and RCF product pages for their separate explanations, or use the contact page to discuss the requirement.
The finder is not advice, a recommendation or an offer of finance. Oku Financial works with business customers only. If your requirement is instead a fixed facility for a defined purpose, the short-term business loans page explains that different structure.
Frequently asked questions
What is the difference between ABL and a revolving credit facility?
Asset-based lending is a revolving facility secured against a combined pool of debtors, stock, plant and property, with availability set by a borrowing base. A revolving credit facility is a committed credit line up to an agreed limit that you can draw, repay and redraw, subject to financial covenants.
Is asset-based lending a type of revolving credit?
Yes. ABL is a revolving credit facility, but its availability is calculated from a borrowing base of your assets and scales as your asset base grows.
Do I pay interest on the full facility?
For both ABL and a revolving credit facility, interest is charged only on the amount drawn. A revolving credit facility may also carry a commitment fee on undrawn amounts.
Which suits a business that has outgrown invoice discounting?
Asset-based lending may suit a business that has outgrown a standalone invoice discounting facility.
Can a revolving credit facility replace an overdraft?
A revolving credit facility may suit a company looking to replace or supplement an overdraft with a committed facility.
Is Oku Financial a lender?
No. Oku Financial is a commercial finance broker. We work with a panel of lenders to find funding for UK businesses.
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