By K2 Capital | November 5, 2025 | Asset-based lending, accounts receivable financing, inventory-based revolving credit
We see this pattern frequently. The business is healthy, revenue is growing, and demand is strong. But the bank credit line has not kept pace. Receivables expand, inventory builds, and traditional cash-flow underwriting creates friction at exactly the moment a company needs more flexibility, not less.
Asset-based lending solves that problem by structuring the facility around the company’s collateral base rather than historical EBITDA.
Recent Example
A manufacturing business had nearly doubled sales over two years. The bank line had not kept up. As receivables expanded, working capital tightened, and management was forced to slow production despite strong demand.
We introduced an asset-based lending facility structured around the company’s receivables and inventory. The revolving line scaled automatically as new invoices were generated. Instead of constraining growth, the capital moved with it.
How It Works
The facility is structured as a senior secured revolving line of credit tied to a borrowing base. Eligible receivables and inventory determine availability, and the line expands as the collateral base grows.
Reporting requirements are more structured than traditional bank lines, but the tradeoff is significantly greater flexibility and access to working capital. Fewer financial covenants, and availability that reflects the current business, not last year’s financials.
We tend to introduce this capital when speed, certainty, and asset coverage matter more than traditional cash-flow metrics. In many cases, it becomes a stabilization tool that allows a company to continue operating and growing while positioning itself for lower-cost financing in the future.
| Facility Size | $5,000,000 to $50,000,000 revolving credit facility |
|---|---|
| Structure | Senior secured revolving line of credit tied to a borrowing base of accounts receivable and inventory |
| Collateral | Accounts receivable, inventory, equipment or other operating assets when appropriate |
| Advance Rates | Structured as a percentage of eligible receivables and inventory, adjusted for concentration and asset quality |
| Best Fit Borrower | Operating businesses with meaningful receivables or inventory; companies experiencing rapid growth or transitional cash flow; businesses whose bank line no longer reflects their operating scale |
| What Makes This Capital Different | Underwritten to asset quality rather than historical EBITDA; availability grows with receivables and inventory; fewer financial covenants than bank lending; designed for growth or transitional periods |
| Common Use Cases | Businesses growing faster than their bank line allows; companies navigating covenant pressure; operators completing acquisitions or scaling production; asset-heavy businesses needing flexible working capital Businesses growing faster than their bank line allows; companies navigating covenant pressure; operators completing acquisitions or scaling production; asset-heavy businesses needing flexible working capital |
If this sounds like a fit for your situation, submit a request with some additional context. We will review it and determine whether this capital partner aligns with your situation.