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Asset Based Lending vs. Factoring – Which Is Best for Your Business?

Factoring is a type of asset based financing that is often confused with asset based lending.  While these products have some similarities, they are different.  This article helps you understand the differences between these products and helps you determine which one is best suited for your company.


Factoring, also know as invoice factoring and accounts receivable factoring, is when a factoring company buys your invoices in exchange for immediate payment.  Factoring can be a very effective way for businesses to improve their cash flow by eliminating the 30 to 90 day waiting period to get paid.

Invoice factoring provides immediate cash and does not require a lengthy application or approval process.  There is no origination fee or audit fees charged.  Factoring is flexible for the clients needs and there are no restrictions on how the client uses the funds.

Asset Based Lending

Frequently referred to as an ABL, this type of loan or line of credit is secured using the company’s assets as collateral.  The collateral can include invoices, inventory, equipment, and other assets.  The asset based lending agreement is a line of credit that allows the borrower draw funds and then pay down as needed.

The lender uses the value of the assets to determine a borrowing base.  The borrowing base is usually a percentage of the market value of these assets.  ABL lenders often provide loan-to-value (LTV) ratio of 75% to 90% for invoices.  Other collateral is financed at a lower LTV, usually 50% or less.

Approval time for an ABL can take several weeks or more.  Lenders will perform collateral checks and often bring in outside auditors at the customer’s expense. 

Call us today at 800-297-6652 or schedule an appointment to learn how accounts receivable factoring improves small business cash flow.  In the DFW area, call 972-404-4726. To find out how invoice factoring can help get your small business off the ground, call Jack Stieber or Brad Gurney  or  complete our quick application form.

Voted best Invoice Factoring Company for SMBs for 2022 by


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