FAQs & Troubleshooting

How are invoice financing (i.e. factoring) and asset-based lending different?

Factoring involves the sale of accounts receivable to a third party, while asset-based lending uses assets like accounts receivable and inventory as collateral for a loan.

How does factoring and asset-based lending allow businesses to borrow money?

In the case of invoice financing (or factoring) businesses essentially sell their accounts receivable, while ABL requires companies to use assets as collateral. businesses can access financing through factoring or asset-based lending, providing them with much-needed capital, but as mentioned in this article, there are significant differences between the two options.

In what ways can assets be used as collateral for a loan in asset-based lending?

In asset-based lending, assets such as accounts receivable, inventory, machinery, and real estate can be used as collateral for loans, giving businesses flexibility in accessing financing.

What is the difference between Accounts Receivable Finance and Asset-Based Lending?

Accounts Receivable Finance, or factoring, involves a business selling its accounts receivable to a factor at a discount. Asset-Based Lending, on the other hand, uses a business’s assets, such as accounts receivable and inventory, as collateral for a line of credit.

What types of asset-based loans can a business obtain?

Businesses can obtain various types of asset-based loans, including revolving lines of credit secured by accounts receivable and inventory, equipment financing using machinery as collateral, and real estate loans.

Who typically acts as the lender in asset-based lending?

Asset-based lending is usually provided by specialized financial institutions or asset-based lenders who understand the complexities of using assets as collateral for loans.