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Factoring vs asset-based lending?

Question asked by Theodore - Feb 20, 2014
Question

What's the difference between factoring and asset based lending?

response from John Englund
- Feb 20, 2014

Factoring is lending based on invoices, whereas asset-based lending is based on assets. Factoring is a financial transaction in which a business owner sells his receivables (invoices) to a factor, which then makes an advance of 80-90% of the invoice’s value. The factor collects the full amount from the customer and pays the balance amount due to the business owner after deducting his commission and other charges. Asset Based Lending (ABL) is when an organisation lends money to a business against the business’s property, plant, machinery, stock, or sometimes even its brand name. ABL provides funding for a variety of needs including growth, refinancing, turnarounds, and public to private transactions. Sometimes multiple asset-based lenders will work together to amplify their lending power in what is known as a syndication. 

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