<PAGE>
Filed Pursuant to Rule 424(b)(3)
File No. 333-87333
--------------------------------------------------------------------------------
American Business Financial Services, Inc.
Rate Supplement
Investment Notes
Prospectus Supplement Dated August 15, 2000
American Business Financial Services, Inc.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
TERM RATE ANNUAL YIELD* BONUS BONUS RATE BONUS YIELD*
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3-5 mos. 7.75% 8.05% -- -- --
6-11 mos. 8.75% 9.14% -- -- --
12-17 mos. 9.70% 10.18% .25% 9.95% 10.46%
18-23 mos. 9.85% 10.35% .25% 10.10% 10.62%
24-29 mos. 9.95% 10.46% .25% 10.20% 10.73%
30-35 mos. 10.10% 10.62% .25% 10.35% 10.90%
36-47 mos. -- -- -- 11.50% 12.18%
48-59 mos. 10.65% 11.23% .25% 10.90% 11.51%
60-119 mos. 11.25% 11.90% .25% 11.50% 12.18%
120 mos. 11.50% 12.18% .25% 11.75% 12.46%
-------------------------------------------------------------------------------------------------------
</TABLE>
Minimum for Investment Notes $1,000.
Ask about our rates for larger investments. Please call (800) 776-4001 for more
information.
American Business Financial Services, Inc. is a NASDAQ listed Company (ABFI).
*The Effective Annual Yield assumes all interest remains invested for 365 days.
American Business Financial Services, Inc. is a publicly traded Company (NASDAQ:
ABFI). An offer can only be made by the Prospectus dated October 15, 1999
delivered in conjunction with this Rate Supplement dated August 15, 2000. See
"Risk Factors" in the Prospectus for a discussion of certain factors which
should be considered in connection with an Investment in the Notes. Interest is
compounded daily based on a 365-day year.
Subordinated Investment Notes represent obligations of the Company and are not
certificates of deposit or insured by the FDIC or any governmental or private
entity. This announcement is neither an offer to sell nor a solicitation of an
offer to buy Subordinated Investment Notes. This offer is made by prospectus
only. Rates offered are good through September 4, 2000. These rates are
available to residents of the following states: AZ, CA, CO, HI, IA, ID, KS, MN,
MO, MT, ND, NM, NV, OK, OR, UT, WA, WY.
Updated Risks Related to the Offering of Debt Securities.
Since we have historically experienced negative cash flows from our operations
and expect to do so in the foreseeable future, our ability to repay the
investment notes could be impaired.
We have historically experienced negative cash flow from operations since
1996 primarily because our strategy of selling loans through securitization
requires us to build an inventory of loans over time. During the period we are
building this inventory of loans, we incur costs and expenses. We do not
recognize a gain on the sale of loans until we complete a securitization, which
may not occur until a subsequent period. In addition, our gain on a
securitization results from our retained interests in the securitized loans,
consisting primarily of interest-only strips, which do not generate cash flow
immediately. We expect this negative cash flow from operations to continue in
the foreseeable future. Should we continue to experience negative cash flows
from operations, it could impair our ability to make principal and interest
payments due under the terms of the investor notes. At March 31, 2000, there was
$206.0 million of investment notes which will mature through June 30, 2001.
We obtain the funds to repay the investment notes at their maturities by
securitizing our loans, selling whole loans and selling additional investment
notes. We may in the future generate cash flows by securitizing or selling
interest-only strips and selling servicing rights generated in past
securitizations. If we are unable in the future to securitize our loans, to sell
whole loans, or to realize cash flows from interest-only strips and servicing
rights generated in past securitizations, our ability to repay the investment
notes could be impaired. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Our estimates of the value of residual interests and servicing rights we retain
when we securitize loans could be inaccurate and could result in reduced profits
and impair our ability to repay the notes.
<PAGE>
We generally retain residual interests and servicing rights in the
securitization transactions we complete. We estimate the fair value of the
residual interests and servicing rights based upon established discount rates
and prepayment and default assumptions. Together, these two assets represent 61%
of our total assets at March 31, 2000. The value of our interest-only strips and
residual strips totaled $259.0 million and the value of our servicing rights
totaled $66.0 million at March 31, 2000. Although we believe that these amounts
represent the fair value of these assets, the amounts were estimated based on
discounting the expected cash flows to be received in connection with our
securitizations using established discount rates, prepayment rates and default
rate assumptions. Changes in market interest rates may impact our discount rate
assumptions and our actual prepayment and default experience may vary materially
from these estimates. Even a small unfavorable change in these assumptions
utilized could have a significant adverse impact on the value of these assets.
In the event of an unfavorable change in these assumptions, the fair value of
these assets would be overstated, requiring an adjustment which would adversely
affect our income in the period of adjustment and impair our ability to repay
the notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
[ABFS LOGO]
BalaPointe Office Centre, 111 Presidential Boulevard, Bala Cynwyd, PA 19004
2255 Glades Road, Suite 311E Boca Raton, FL 33431
2425 East Camelback Road, Suite 1065, Phoenix, AZ 85016
www.abfsonline.com
<PAGE>
Filed Pursuant to Rule 424(b)(3)
File No. 333-87333
--------------------------------------------------------------------------------
American Business Financial Services, Inc.
Rate Supplement
Investment Notes
Prospectus Supplement Dated August 15, 2000
American Business Financial Services, Inc.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
TERM RATE ANNUAL YIELD* BONUS BONUS RATE BONUS YIELD*
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3-5 mos. 7.75% 8.05% -- -- --
6-11 mos. 8.75% 9.14% -- -- --
12-17 mos. 9.70% 10.18% .25% 9.95% 10.46%
18-23 mos. 9.85% 10.35% .25% 10.10% 10.62%
24-29 mos. 9.95% 10.46% .25% 10.20% 10.73%
30-35 mos. -- -- -- 11.50% 12.18%
36-47 mos. 10.35% 10.90% .25% 10.60% 11.18%
48-59 mos. 10.65% 11.23% .25% 10.90% 11.51%
60-119 mos. 11.25% 11.90% .25% 11.50% 12.18%
120 mos. 11.50% 12.18% .25% 11.75% 12.46%
-------------------------------------------------------------------------------------------------------
</TABLE>
Minimum for Investment Notes $1,000.
Ask about our rates for larger investments. Please call (800) 776-4001 for more
information.
American Business Financial Services, Inc. is a NASDAQ listed Company (ABFI).
*The Effective Annual Yield assumes all interest remains invested for 365 days.
American Business Financial Services, Inc. is a publicly traded Company (NASDAQ,
ABFI). An offer can only be made by the Prospectus dated October 15, 1999
delivered in conjunction with this Rate Supplement dated August 7, 2000. See
"Risk Factors" in the Prospectus for a discussion of certain factors which
should be considered in connection with an Investment in the Notes. Interest is
compounded daily based on a 365-day year.
Subordinated Investment Notes represent obligations of the Company and are not
certificates of deposit or insured by the FDIC or any governmental or private
entity. This announcement is neither an offer to sell nor a solicitation of an
offer to buy Subordinated Investment Notes. This offer is made by prospectus
only. The rates are available through September 4, 2000. These rates are
available to residents of the following states: AL, AR, CT, DE, FL, GA, IL, IN,
KY, MA, MD, ME, MI, MS, NC, NH, NJ, NY, OH, PA, RI, SC, TN, TX, VA, VT, WI, WV.
Updated Risks Related to the Offering of Debt Securities.
Since we have historically experienced negative cash flows from our operations
and expect to do so in the foreseeable future, our ability to repay the
investment notes could be impaired.
We have historically experienced negative cash flow from operations since
1996 primarily because our strategy of selling loans through securitization
requires us to build an inventory of loans over time. During the period we are
building this inventory of loans, we incur costs and expenses. We do not
recognize a gain on the sale of loans until we complete a securitization, which
may not occur until a subsequent period. In addition, our gain on a
securitization results from our retained interests in the securitized loans,
consisting primarily of interest-only strips, which do not generate cash flow
immediately. We expect this negative cash flow from operations to continue in
the foreseeable future. Should we continue to experience negative cash flows
from operations, it could impair our ability to make principal and interest
payments due under the terms of the investor notes. At March 31, 2000, there was
$206.0 million of investment notes which will mature through June 30, 2001.
We obtain the funds to repay the investment notes at their maturities by
securitizing our loans, selling whole loans and selling additional investment
notes. We may in the future generate cash flows by securitizing or selling
interest-only strips and selling servicing rights generated in past
securitizations. If we are unable in the future to securitize our loans, to sell
whole loans, or to realize cash flows from interest-only strips and servicing
rights generated in past securitizations, our ability to repay the investment
notes could be impaired. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<PAGE>
Our estimates of the value of residual interests and servicing rights we retain
when we securitize loans could be inaccurate and could result in reduced profits
and impair our ability to repay the notes.
We generally retain residual interests and servicing rights in the
securitization transactions we complete. We estimate the fair value of the
residual interests and servicing rights based upon established discount rates
and prepayment and default assumptions. Together, these two assets represent 61%
of our total assets at March 31, 2000. The value of our interest-only strips and
residual strips totaled $259.0 million and the value of our servicing rights
totaled $66.0 million at March 31, 2000. Although we believe that these amounts
represent the fair value of these assets, the amounts were estimated based on
discounting the expected cash flows to be received in connection with our
securitizations using established discount rates, prepayment rates and default
rate assumptions. Changes in market interest rates may impact our discount rate
assumptions and our actual prepayment and default experience may vary materially
from these estimates. Even a small unfavorable change in these assumptions
utilized could have a significant adverse impact on the value of these assets.
In the event of an unfavorable change in these assumptions, the fair value of
these assets would be overstated, requiring an adjustment which would adversely
affect our income in the period of adjustment and impair our ability to repay
the notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
[ABFS LOGO]
BalaPointe Office Centre, 111 Presidential Boulevard, Bala Cynwyd, PA 19004
2255 Glades Road, Suite 311E, Boca Raton, FL 33431
2425 East Camelback Road, Suite 1065, Phoenix, AZ 85016
www.abfsonline.com
