<PAGE>

                   AMERICAN BUSINESS FINANCIAL SERVICES, INC.
                                 [COMPANY LOGO]

                          SUBORDINATED INVESTMENT NOTE


NUMBER  _______________________               DATE ISSUED  ___________________

PRINCIPAL AMOUNT  $____________               TERM  __________________________

INTEREST RATE PER ANNUM  _____%               MATURITY DATE  _________________

                            INTEREST COMPOUNDED DAILY

                            PAYABLE ________________


AMERICAN BUSINESS FINANCIAL SERVICES, INC., a Delaware corporation herein called
the Company, for value received, hereby promises to pay to:




(the "Holder" or "Noteholder")



         Interest payments shall be made by check delivered by mail to the
address of the Holder appearing on the Note register maintained by the Registrar
(which address may be changed from time to time by notice given by Holder in
writing to the Registrar) on the Regular Record Date preceding the subject
Payment Date; principal and interest payment at the end of the term hereof shall
be made in person to Holder at the offices or agency of the Paying Agent in
exchange for this Note. Holder shall be notified prior to such payment of the
address at which such payment shall occur. The Company is currently acting as
Paying Agent and Registrar. The Company may change the Registrar or Paying Agent
without notice to the Noteholder.

         All payments hereunder shall be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.

         All interest on the Notes will be compounded daily and computed on the
basis of a calendar year.



                                      -1-
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         This Note is being issued pursuant to an Indenture dated as of
____________, 2001 ("Indenture") between the Company and U.S. Bank Trust
National Association, a national banking association, as Trustee and in
connection with an offering by the Company of an aggregate of $325,000,000 U.S.
principal amount of unsecured, subordinated investment notes ("Notes") as
described in the Company's Prospectus dated ____________, 2001, as amended and
supplemented from time to time, and a current interest rate supplement thereto.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss.77aaa-77bbbb) ("TIA"). The Notes are subject to all such terms,
and Holder is referred to the Indenture and such Act for a statement of such
terms. All capitalized terms not otherwise defined herein shall have the meaning
given to such terms in the Indenture.

         Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         IN WITNESS WHEREOF, American Business Financial Services, Inc. has
caused this Note to be signed on the date first above written.


                      ISSUER:

                      AMERICAN BUSINESS FINANCIAL SERVICES, INC.



(SEAL)                BY:
                         ---------------------------------------------------
                         Anthony J. Santilli, Chairman, President,
                         Chief Executive Officer and Chief Operating Officer

                      Attest:
                             -----------------------------------------------
                             Officer of Company


                      COUNTERSIGNED AND REGISTERED BY
                      U.S. BANK TRUST NATIONAL ASSOCIATION, a
                      national banking association



                      BY:
                         ---------------------------------------------------
                         Authorized Signature



                                      -2-
<PAGE>
                             [REVERSE SIDE OF NOTE]

         1. Subordination. The indebtedness evidenced by the Note shall be
postponed and subordinated and is subject in right of payment, to the extent and
in the manner set forth in the Indenture, to the prior payment in full of all
"Senior Debt" of the Company. "Senior Debt" means any indebtedness (whether
outstanding on the date of issuance of this Note or thereafter created) incurred
by the Company in connection with borrowings by the Company (including its
subsidiaries) from a bank, trust company, insurance company, other institutional
lender or other entity which lends funds in connection with its primary business
activities whether such indebtedness is or is not specifically designated by the
Company as being "Senior Debt" in its defining instruments. The Company agrees,
and Holder by accepting this Note consents and agrees, to the subordination
provided for in the Indenture and authorizes the Trustee to give it effect.

         2. Subrogation. As more fully set forth in the Indenture, subject to
the payment in full of all Senior Debt of the Company, Holder shall be
subrogated to the rights of the holders of Senior Debt of the Company to receive
payments or distributions of assets of the Company made on the Senior Debt of
the Company until the principal of and interest on this Note shall be paid in
full, and for purposes of such subrogation, no such payment or distributions to
the holders of Senior Debt of the Company of cash, property or securities, which
otherwise would be payable or distributable to Holder, shall be between the
Company, its creditors other than the holders of Senior Debt of the Company, and
Holder, be deemed to be a payment by the Company to or on account of this Note,
it being understood that the provisions of this paragraph are intended solely
for the purpose of defining the relative rights of Holder, on the one hand, and
the holders of Senior Debt of the Company, on the other hand.

         3. Nonimpairment. Nothing contained in this Note is intended to or
shall impair, as between the Company, the Company's creditors other than the
holders of Senior Debt of the Company, and Holder, the obligation of the
Company, which is absolute and unconditional, to pay to Holder the principal of
and interest on this Note, as and when the same shall become due and payable in
accordance with its terms, and which, subject to the rights under Article X of
the Indenture of the holders of Senior Debt of the Company, is intended to rank
equally with all other general obligations of the Company. In addition, nothing
contained in this Note is intended to or shall affect the relative rights of
Holder and creditors of the Company other than the holders of Senior Debt of the
Company, nor shall anything herein or therein prevent the Holder of this Note
from exercising all remedies otherwise permitted by the Indenture and applicable
law upon the occurrence of an Event of Default, subject to the rights, if any,
under Article X of the Indenture of the holders of Senior Debt of the Company in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.

         4. Redemption by the Company. The Company may not redeem, in whole or
in part, any Note prior to its stated maturity, except upon 90 days prior
written notice to the Holder thereof listed on the records maintained by the
Company.

                                      -3-
<PAGE>

         5. Mandatory Redemption and Redemption Upon Death or Total Permanent
Disability. Except as provided in Article III of the Indenture with respect to
the Company's obligation to redeem Notes at the request of certain Holders, who
are natural persons, (in the event of such Holder's total permanent disability),
the estate of a Holder (in the event of Holder's death) or a joint holder (in
the event this Note is held jointly by a husband and wife and one spouse suffers
a total permanent disability or dies), the Company has no mandatory redemption
to sinking fund obligations with respect to this Note.

         Notes with remaining maturities of one year or greater may be redeemed
at the election of the holder, who is a natural person, following his/her total
permanent disability, as established to the Company's satisfaction, or by
his/her estate following his/her death. The redemption price, in the event of
such a death or disability, will be the principal amount of the Note, plus
interest accrued and not previously paid, to the date of redemption. If spouses
are joint registered holders of a note, the election to redeem will apply when
either registered holder dies or becomes subject to a total permanent
disability. In other cases of notes jointly held by persons who are not legally
married, the election to redeem upon the death of one joint holder will not
apply. If the note is held by a person who is not a natural person such as a
trust, partnership, corporation or other similar entity, the redemption upon
death or disability does not apply.

         6. Right of Set-Off In Certain Circumstances. Subject to the conditions
of applicable law, if the holder of the Note is a borrower or guarantor on a
loan made by the Company's subsidiaries which becomes delinquent, we reserve the
right to set-off principal and interest payments due on the debt securities
against such delinquent loans. This right to set-off payments due on the debt
securities is subject to the Holder's agreement with the set-off terms at the
time the loan is originated or the guarantee is entered into.

         7. Events of Default. An event of Default is:

                  (a) Default in the payment of any interest upon this Note when
it becomes due and payable and continuance of such default for a period of 30
days (whether or not prohibited by the subordination provisions of the
Indenture); or

                  (b) Default in the payment of principal of this Note when it
becomes due and payable at maturity, upon redemption or otherwise (whether or
not prohibited by the subordination provisions of the Indenture)and continuance
of such default for 30 days; or

                  (c) Failure by the Company to comply with any of its
agreements upon a liquidation, consolidation, merger or transfer of
substantially all of the Company's assets (after notice and provided such
default is not cured within 60 days after receipt of notice); or

                  (d) Failure by the Company for 60 days after notice to comply
with any of its other agreements in the Indenture or this Note; or

                                      -4-
<PAGE>

                  (e) Certain events of bankruptcy or insolvency (with respect
to the Company).

         If an Event of Default occurs and is continuing, the Trustee or the
holders of at least a majority in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes become due and payable immediately without
further action or notice. Holders of Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or powers.
The Trustee may withhold from Noteholders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice would have no material adverse effect on the Noteholders. The
Company must furnish an annual compliance certificate to the Trustee.

         8. Transfer and Exchange. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. This Note may not be
assigned, transferred or otherwise alienated without the prior written consent
of the Company (which consent shall not be unreasonably withheld) and shall be
subject to the Company's right to demand and receive an opinion of Holder's
legal counsel (which counsel shall be reasonably acceptable to the Company) that
the transfer does not violate any applicable securities laws. The Company may
also require a signature guarantee.

         9. Automatic Extension. Approximately twenty (20) but not less than
fifteen (15) days prior to a Note's stated maturity date, the Company will
notify the registered Noteholder of such maturity date. If, at least seven (7)
days prior to a Note's stated maturity date, the Company does not notify the
Noteholder of its intention to repay, subject to the Noteholder's demand for
repayment, the term of such Note shall be automatically extended. If, within
seven (7) days after a Note's maturity date, the Noteholder thereof has not
demanded repayment of such Note, and the Company has not notified the Noteholder
of its intention to repay such Note, such Note shall be automatically extended
for the same term identical to the term of the original Note. The Note will
continue to renew as described herein absent some action permitted under the
Indenture and the Notes by either the Noteholder or the Company. Interest shall
continue to accrue from the first day of such renewed term. Such Note, as
renewed, will continue in all its provisions, including provisions relating to
payment, except that the interest rate payable during any renewed term shall be
the interest rate which is then being offered by the Company on similar Notes
being offered as of the renewed date. If similar Notes are not then being
offered, the interest rate upon renewal will be the rate specified by the
Company on or before the maturity date, or the Note's current rate if no such
rate is specified. If the Company gives notice to a Noteholder of the Company's
intention to repay a Note at maturity no interest will accrue after the date of
maturity. Otherwise, if a Noteholder requests repayment within seven (7) days
after its maturity date, the Company will pay interest during the period after
its maturity date and prior to repayment at the lower of (i) the lowest interest
rate then being paid on debt securities being offered by the Company to the
general public or (ii) the rate being paid on such Note immediately prior to its
maturity.

                                      -5-
<PAGE>

         10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.

         11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented and any existing Default
under, or compliance with any provision of, the Indenture may be waived with the
written consent of the Holders of at least a majority in principal amount of the
Notes then outstanding. Without the consent of any Holder, the Company and the
Trustee may amend or supplement the Indenture or the Notes to cure any
ambiguity, defect or inconsistency; to provide for assumption of our obligations
to holders of the debt securities in the case of a merger or consolidation; to
provide for additional certificates or certificated securities; to make any
change that would provide any additional rights or benefits to the holders of
the Notes or that does not adversely affect the legal rights under the indenture
of any such holder, including an Increase in the aggregate dollar amount of debt
securities which may be outstanding under the indenture; to modify the Company's
policy to permit redemptions of the Notes upon the death or total permanent
disability of any holder of the Notes (but such modification shall not adversely
affect any then outstanding security); or to comply with requirements of the SEC
in order to effect or maintain the qualification of the indenture under the
Trust Indenture Act.

         12. Trustee Dealings with Company. So long as done in accordance with
the TIA, the Trustee, in its individual or any other capacity, may make loans
to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Trustee.

         13. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.

         14. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.

         The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:

                   AMERICAN BUSINESS FINANCIAL SERVICES, INC.
                            BALAPOINTE OFFICE CENTRE
                             111 PRESIDENTIAL BLVD.
                              BALA CYNWYD, PA 19004

                     --------------------------------------

                                      -6-
<PAGE>

         The following abbreviations, when used in the inscription on the face
of the within Note, shall be construed as though they were written out in full
according to applicable laws or regulations.

TEN COM  -        as tenants in common
TEN ENT  -        as tenants by the entireties
JT TEN   -        as joint tenants with right of survivorship and not as tenants
                  in common
UNIF GIFT MIN ACT -        __________  Custodian __________
                             (Cust)              (Minor)
                           under Uniform Gifts/Transfers to Minors
                           Act ____________________________
                                        (State)

         Additional abbreviations may also be used though not in the above list.

                     --------------------------------------



                                      -7-
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         FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE:

------------------------------------


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               (NAME AND ADDRESS OF ASSIGNEE, INCLUDING ZIP CODE,
                              MUST BE TYPEWRITTEN)

--------------------------------------------------------------------------------
the within Note, and all rights thereunder, hereby irrevocably

--------------------------------------------------------------------------------
constitute and appoint

_______________________________________________________________________ Attorney
to transfer said Note on the books of the Company, with full power of
substitution in the premises.

Dated:
                      -------------------------------------


NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Note in every particular, without alteration
or enlargement, or any change whatever.


                                      -8-