What is Bank Loan & Asset-Backed Lending

Bank loan & asset-backed lending is one way to finance a subscription model for product subscriptions in a product-as-a-service business model. Other options include:

What it is

Asset-backed lending means a bank or specialist lender gives you a loan or revolving line secured by something tangible: your fleet/devices and/or your subscription receivables. Because the lender has first claim on the collateral, pricing can be much cheaper than equity and often cheaper than unsecured debt.

How it works

• Collateral agreed: The lender values eligible assets (e.g., bikes, devices, machines) and/or receivables.
• Advance set: You borrow a % of that value (the advance rate) inside a term loan or revolver.
• Covenants & monitoring: You report metrics (utilisation, losses, delinquencies).
• Repay from cash flow: Subscriptions fund interest + principal; as assets/receivables amortise, availability updates.
• If you scale: The line can revolve and grow with the fleet, or later be termed out / securitised.

Where it fits

• Core funding for the assets when units are standard, hold resale value, and performance is proven.
• After initial traction: once you have history on churn, recoveries, and payment success.
• Cheaper capital stack: lowers blended cost versus equity/RBF.

When it’s a poor fit

• Thin residual value or hard-to-recover assets.
• Unproven utilisation/retention (early pilots with noisy data).
• Weak data/reporting: lenders need clean telemetry and collections data.

FAQs

Is this different from an equipment lease?
Similar economics (debt secured by assets). A loan/revolver keeps ownership with you; a lease shifts ownership/control to a lessor with rent-style payments.

Can banks lend against receivables instead of devices?
Yes—ABL can be secured by receivables, inventory, equipment, or a mix.

Do most capital-intensive subscription startups use debt?
In mobility and other fleet-heavy models, yes—industry news shows e-scooters, e-bikes, and car subscriptions relying on debt/ABS to fund fleets.

What rates should I expect?
Highly situational. As a reference point, unsecured or higher-risk paper can price materially higher (e.g., VOI at Euribor + 6.75% in 2024), while well-secured, well-performing ABL for established programs can be low- to mid-single-digit over the cycle.