What Is Asset Based Lending? 

A Sensible Solution In Today's Tight Credit Environment. 

Cash flow is a business's biggest need, and when it fails to flow, there is a simple and time proven method to liquidate receivables into ready cash. Factoring is a cash flow tool that can be used by a variety of businesses because of the ancillary services it provides and the internal resources it can free up.

Asset based financing is a fairly straightforward concept - Loans secured by the borrower's business assets long have been popular with manufacturers, wholesalers, distributors and other companies with hard assets and accounts receivable. Asset based lending is matching a company's assets to its borrowing needs. Unlike traditional bank debt that relies heavily on balance sheet ratios and cash flow projections as loan criteria, asset based lending uses a client's business assets as its primary focus for lending. The result is usually far greater borrowing power than can be achieved from a traditional cash flow banking approach.

An important aspect of asset based lending is that prospective borrowers do not have to be profitable or have a minimum net worth. A business with tangible assets and qualified management can use its assets to create additional working capital to help carry out its business plans.

         Collateral Types:

         Accounts Receivable

         Inventories

         Machinery and Equipment

         Real Estate

         Certain Intangibles

Asset based lending (ABL) is considered a valid option for solid companies that can't get bank loans because of banks' tighter credit standards,  Asset based lending is well suited for firms that want to grow by merger or acquisition -- or companies that just need to get through a tough time. Asset based lending may be a

better alternative to venture capital and more flexible.

"The No. 1 benefit of Asset based lending from a customer perspective is added flexibility," Asset-based loans are popular in a soft economy, because they remain a steady source of financing, even when a company's circumstances change.  A firm can get an Asset based loan in a down economy, as assets fluctuate up and down, as well as in a more fueled economy, when you need more capital as sales start growing."

 Asset-based loans can be used for both short-term, transitional financing and longer-term funding.

  ABL terms often range from one year to seven years, depending on how a borrower structures its balance sheet and cash flow and earnings history, according to lenders. Asset-based loans are repaid using accounts receivable, defined as what a borrower's customers owe it. Lenders constantly monitor those receivables and scrutinize accounts and inventory.

Because asset-based loans are supported by working capital assets, lenders are more comfortable leveraging at a higher level. Subsequently, the loans provide more liquidity than bank loans.

Call Us Today For a Consultation

Mike Federighi

Maurice I. Simon

(702) 384-6000

Let's discuss your company's borrowing needs and see how 

cash today can help your business grow tomorrow

What Is Factoring?

Cash Flow Problems? Past due to suppliers — or to your employees? Factoring can help you get the funding your company needs.

When the economy shows signs of a sluggish trend, one of the first things to slow down is a business's cash flow. Businesses that are not prepared to creatively raise additional working capital may be in for a rough ride when their receivables begin to trickle in. 

The Federal Reserve is raising interest rates and credit at most commercial banks is being tightened leaving many small to mid-size businesses with few available alternatives for improving their financial standing.  Cash flow is a business's biggest need, and when it fails to flow, there is a simple and time proven method to liquidate receivables into ready cash.

Factoring is a tool that is used by a variety of businesses to improve cash flow.   Many businesses factor simply because of the ancillary services it provides and the internal resources it can free up.

What can factoring do for your business?

Why would a business need to factor? If you're providing products or services to other businesses more often than not, you're financing their purchases. Typical terms range anywhere from 10 to 60 days. However, we all know that most businesses fail to pay within the generous terms extended.

What basic qualifications does a business need to have in order to be a candidate for factoring?

• They must be selling to other creditworthy businesses.
• The product or service must have been delivered and accepted.
• The factor must be able to obtain a priority collateral position on the receivables.
• The customer may not have any rights to return or offset payment on the product or service.

Many businesses, particularly small to mid-sized and rapidly-growing companies, use factoring to:

• Generate instant working capital
• More easily predict and manage cash flow
• Increase sales by offering customers competitive extended credit terms.
• Avoid cash flow problems caused by customers with long payment cycles

Companies of all types, from a wide array of industries, are able to better manage cash flow and benefit from factoring services like accounts receivable financing, invoice factoring, and invoice discounting. Some common examples include construction and/or contractor factoring, service companies of all types, temporary employment agencies, healthcare and commercial businesses, consulting companies, software companies, manufacturing businesses, and many more.

How does factoring work?

Factoring works like this: A factor purchases its clients' invoices and immediately advances most of the invoice amount in cash. The remainder of the invoice amount is remitted to the client upon collection, minus a small service fee. Ideally, the fee should be all-inclusive and not exceed from two and a half to four percent, based on the credit and collection characteristics of the client and its customer base. In selecting a factoring company, it is important to have the factoring firm specify up front if there will be any additional processing, administrative or other hidden fees in addition to the percentage charge.

Invoices can be purchased individually but usually are processed in batches as part of an ongoing account. Depending on the factor's scope of service and the needs of the client business, a factor can handle other administrative tasks as well, such as helping keep a company's accounting up to date, assisting with collections and advising on tax requirements and other issues. For a small business with a lean staff, these services are worth consideration.

Is factoring right for you? Traditionally, this mode of financing works best for small to mid-sized companies that don't have much collateral yet or start-ups that haven't developed an established relationship with a bank. In the latter case, it can be the temporary financing measure that fills in until a working capital loan is possible. Factoring also fills a need for rapidly-expanding companies who are outgrowing their operating capital.

What basic qualifications does a business need to have in order to be a

candidate for factoring?

If you're providing products or services to other businesses more often than not, you're financing their purchases. With typical terms range anywhere from 10 to 60 days, we all know that many businesses fail to pay within the generous terms extended.  This is where factoring your accounts receivables can help you get cash today!

What Business qualify for factoring?  Most do!

• You must be selling to other creditworthy businesses.
• The product or service must have been delivered and accepted
• The factor must be able to obtain a priority collateral position on the receivables.
• The customer may not have any rights to return or offset payment on the product or service.

Call Us Today For a Consultation

Terry Barone

Broker

(702) 682-5202

Let's discuss your company's borrowing needs and see how 

cash today can help your business grow tomorrow