How is Account Receivable Factoring vs Asset Based Lending - 3

Posted by matthew begley on Mon, Mar 19, 2012

asset based lending, account receivable factoring, accounts receivable factoring, asset based loan, invoice factoring, invoice discounting

How is account receivable factoring different from Asset Based Lending?  Part three in our series.  

Click the following links for the first and second parts:

Part 1    

Part 2  

In the third part of our series we will be discussing how you can decide which financial tool will better fit your business depending your situation. This question can become very complicated so I will try and limit the variables to the four most important criteria of your business.

You need to ask yourself some basic questions? 

  • What are the assets of my business that I have the biggest investment in?

        If your answer is accounts receivable, and not inventory or machinery and equipment or real estate then factoring may be the best solution.  If your firm has large investments in inventory, machinery and equipment or real estate it may be a better fit for asset based lending.  

  • How much and of what quality is the financial information available on my business?  This includes years of operation and readily accessible information on the financial performance of the business.  

       If your answer is that your business has been around for several years and you have a strong accounting department then asset based lending may work for you.  If your answer is that you are busy growing your business and haven't been able to build a strong financial infrastructure than account receivable factoring may be your best fit.

  • How fast do I need the financing in place?  

I have worked in invoice factoring and asset based lending for 15 years and I can tell you that the majority of the time it takes a minimum of 60 days to get an asset based loan in place.  With the totally online system at Fast A/R Funding we have funded clients in less than 48 hours.  

  • How big is my business?  
If your company is under $5,000,000 in annual revenue that it will be difficult to find an asset based lender willing to finance your firm and if you do the fixed costs of administering the asset based loan will make it extremely expensive for you.

When you have answer to these four simple questions you are probably on your way to making a good decision.  Make sure to get the advice of other business people you respect who have experience in asset based lending or account receivabe factoring and your CPA.

To learn more about electronic account receivable factoring click the button below.



Tags: Asset Based Lending