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Articles on Accounts Receivable Factoring versus Asset Loans

The following articles on asset loans are provided to help you in better understanding how asset loans are structured and just how asset loans work. We hope that this will be of assistance to you as you look for a source for your asset loans needs

As we noted at the beginning of this page, even though asset loans are technically NOT accounts receivables factoring (the services that we actually provide) because many people confuse the two terms and act as if they are interchangeable, we are going to use the common vernacular term asset loans for simplicity.

Accounts Receivable Funding are NOT loans so they are not actually asset "loans" because they are not a loan at all. In almost all cases you never pay back any money that you receive from accounts receivable factoring funds, so by definition, because you are not paying anything back for the cash that you receive, they cannot be asset loans.

Accounts Receivable Factoring versus Asset Loans - Educating the Entrepreneurial Business Owner - Article 1

This is an article is a series designed to educate the entrepreneurial business owner about the facts about Accounts Receivable Factoring versus Asset Loans, and also the benefits and costs of  Accounts Receivable Factoring versus Asset Loans as an important business tool. The goal of this article about Accounts Receivable Factoring versus Asset Loans is to ensure that the business owner can successful use this tool to grow and prosper in a challenging business environment that exists today.

How does Accounts Receivable Factoring versus Asset Loans Compare to a Bank Line of Credit?

In a prior article, I observed that in most cases; Accounts Receivable Factoring versus Asset Loans is a superior solution for the entrepreneurial business, when objectively compared to a bank loan. I also mentioned that it can be true that in some cases that the cost of Accounts Receivable Factoring versus Asset Loans may exceed the costs of a line of credit at a traditional bank. However, this assumes that your entrepreneurial business would be approved at a bank for a line of credit. This is becoming more and more of a challenge in today’s unsettled economy but Accounts Receivable Factoring versus Asset Loans is becoming more and more of an answer.

More importantly, I also stated that when compared to more commonly used small business capital funding sources, Accounts Receivable Factoring versus Asset Loans is often less expensive and less restrictive. Personal [and corporate] credit cards are often the backbone or primary source of capital for many small businesses. Especially after the changes in credit cards [due to recently passed legislation], Accounts Receivable Factoring versus Asset Loans in many cases is less expensive than these funding tools.

Line of Credit versus. Accounts Receivable Factoring versus Asset Loans

I think it is important to compare, on an “apples to apples” basis the benefits and costs of Accounts Receivable Factoring versus Asset Loans to a bank line of credit. I have identified below 25 key points to compare, if you are looking at a bank line of credit and Accounts Receivable Factoring versus Asset Loans for your business. In each case, I will present common key points I see in bank lines of credit proposals to our firms model of Accounts Receivable Factoring versus Asset Loans.  Please recognize at the outset that each situation or lending institution is different so this example represents our experience in over 14 years of serving clients in the utilization of our Accounts Receivable Factoring versus Asset Loans model.

·       Credit facility. With most bank lines of credit, the credit facility [or total amount of capital available to the entrepreneurial business] will be a fixed $ amount, unlike Accounts Receivable Factoring versus Asset Loans.  This is determined by an in-depth analysis of the profit and loss of the business, net worth, margins, etc.  There is almost always a minimum volume requirement that must be used [or drawn] on a typical line of credit. With Accounts Receivable Factoring versus Asset Loans, there are usually no such constraints, limits or minimum funding requirements. Due to the fact that the amount of available credit is driven by the credit quality of your customer, bank criteria such a net worth, Balance Sheet composition or profitability are secondary consideration for the Accounts Receivable Factoring versus Asset Loans firm. This is a significant advantage for the entrepreneurial business.

Summary and Conclusion for

Accounts Receivable Factoring versus Asset Loans - Educating the Entrepreneurial Business Owner

In this third article, I discussed how Accounts Receivable Factoring versus Asset Loans compares to a traditional bank line of credit. The fact that credit limits are much more flexible [and substantial] with Accounts Receivable Factoring versus Asset Loans makes it a very attractive tool for the entrepreneurial business, whether seasoned or start up. Now that you are more educated in Accounts Receivable Factoring versus Asset Loans, go out there and make some money with other people’s money.

Accounts Receivable Factoring versus Asset Loans-Education on The Advantages - Article 2

This Accounts Receivable Factoring versus Asset Loans article is a series designed to educate the entrepreneurial business owner about the facts about Accounts Receivable Factoring versus Asset Loans, and also the benefits and costs of Accounts Receivable Factoring versus Asset Loans as an important business tool. The goal of this Accounts Receivable Article is to ensure that the business owner can successful use Accounts Receivable Factoring versus Asset Loans as a valuable tool to grow and prosper in a challenging business environment that exists today.

What is Accounts Receivable Factoring versus Asset Loans?

In the prior article on Asset Loans, I defined Accounts Receivable Factoring versus Asset Loans as a transaction where the factor [buyer] purchases a valid commercial invoice [or Accounts Receivable] at an agreed to percentage of the face value of the invoice. Most Accounts Receivable Factoring versus Asset Loans transactions initially provide the seller [you] about 80% of the Accounts Receivable at the point of purchase. The balance, in most cases 20% [100% less the initial 80% advance] is paid to you [the seller] less a small fee when the Accounts Receivable is paid.

 I also answered another important question: Does my business qualify for Accounts Receivable Factoring versus Asset Loans, or what is the typical client attributes for a company that can get approved to use Accounts Receivable Factoring versus Asset Loans as a powerful financial tool?  I commented that there is not a simple or cookie cutter answer to this question regarding whether my business can utilize Asset Loans. However, a couple of guidelines can usually be seen as a common denominator for most firms in the Accounts Receivable Factoring versus Asset Loans industry.

These would include the following:

·      The presence of a commercial [not consumer] Invoice or Accounts Receivable that can be verified by the Accounts Receivable Factoring versus Asset Loans firm

·      The ability to notify your client [who the invoice has been sent to already] that payments would be directed to a lock box for collection

·      And that the credit worthiness of your client(s) can be determined, using credit reports or other credit models.

Accounts Receivable Factoring versus Asset Loans for the Business Entrepreneur - Article 3

This is another article is a series designed to educate the entrepreneurial business owner about the facts about Accounts Receivable Factoring versus Asset Loans, and also the benefits and costs of this important business tool. The goal of this article about Accounts Receivable Factoring versus Asset Loans is to ensure that the business owner can successfully use Accounts Receivable Factoring versus Asset Loans as a tool to grow and prosper in a challenging business environment that exists today and this article will show you that Accounts Receivable Factoring versus Asset Loans is the best way to fund your operating budget. Accounts Receivable Factoring versus Asset Loans could be the difference between success and failure.

 Line of credit comparison versus Accounts Receivable Factoring versus Asset Loans

In the prior articles, I presented key points to consider when comparing Accounts Receivable Factoring versus Asset Loans to a traditional line of credit. They were the size of your credit facility, maturity or length of time for each, the process of increasing the credit facility, collateral requirements, personal guarantees required, closing costs, annual line fees, lock box costs and unused line fees associated with both Accounts Receivable Factoring versus Asset Loans and Line of Credit. In every case, evidence was presented that Accounts Receivable Factoring versus Asset Loans is the superior choice for your entrepreneurial business.  Additional points to consider Accounts Receivable Factoring versus Asset Loans include:

·       Collateral monitoring fees.  Unlike in Accounts Receivable Factoring versus Asset Loans, most bank lines of credit, the bank or lender will impose [in addition to the actual cost of the line, unused fees, closing fees, legal fees, etc.] an additional fee called a Collateral Monitoring fee.  This is an additional fee charged by the bank to offset their cost of monitoring and watching your account, including a review of collateral periodically such as Accounts Receivables, inventory or other assets. This fee is usually calculated on a monthly basis, and would either be automatically taken from your account or due and payable when you were invoiced.

A typical structure for this fee might look like this: $500 per month, for the term of the loan or line of credit, usually 3 years; to be calculated and paid monthly. This is just one of the fees not associated with Accounts Receivable Factoring versus Asset Loans.

The obvious question is this: why should you pay a fee to the bank to watch something that is really their job? Good question. The theory [from the bank’s perspective] is due to the fact that these funds have been allocated to your business, they need to watched and tracked very carefully, a practice that is not done in Accounts Receivable Factoring versus Asset Loans. This makes sense, but shouldn’t this be a cost should be absorbed by the revenue generated by all of the others fees that are charging you/ [For example, interest, unused line fees, annual line fees, etc.] And again this practice is unheard of in Accounts Receivable Factoring versus Asset Loans.

Like many of the other fees we have discussed, this is usually not a negotiable item with the bank, as this is a pretty much a standard part of a bank line of credit Agreement. On the other hand, it never hurts to ask but in Accounts Receivable Factoring versus Asset Loans there is no need to. In the event that you cannot get this fee reduced or negotiated down, this is just another monthly expense to add to your budget or you can just go with Accounts Receivable Factoring versus Asset Loans.

On the other hand, with Accounts Receivable Factoring versus Asset Loans, the contrast between the line of credit and Accounts Receivable Factoring versus Asset Loans is quite clear. With most firms [including our firm], there is never any Collateral Monitoring fee.    

Summary and Conclusion

“Accounts Receivable Factoring versus Asset Loans for the Business Entrepreneur”

In this article, I discussed how Accounts Receivable Factoring versus Asset Loans compares to a traditional bank line of credit by comparing the issues related to costs associated with a Collateral Monitoring Fee. While not usually a significant cost, it is still money out of pocket for you. Most Accounts Receivable Factoring versus Asset Loans firms [including ours] do not charge any Collateral Monitoring fees. For the reasons outlined, Accounts Receivable Factoring versus Asset Loans is a much more flexible and reasonable tool for the entrepreneurial business who seeks maximum flexibility for the future. We have also shown you that Accounts Receivable Factoring versus Asset Loans is the best way to fund your operating budget. Remember, Accounts Receivable Factoring versus Asset Loans could be the difference between success and failure.