Accounts Receivable Financing vs Asset-Based Loans

Determining what financing option is the best fit for your business can be difficult. In order for you to make an informed decision, you need to do a bit of research. When selecting between an asset-based loan and accounts receivable financing, for example, you may find a number of similarities between the options. Take a moment to look over these details and see which service helps you see the results you desire.

Asset-Based Loans

Asset-based loans are very similar to traditional loans. With this service, a lender will give you a loan of a certain amount. The value is determined by the asset you select as collateral to back the loan. Qualifying assets can include real estate connected to your business, equipment your company uses to operate, and unpaid invoices in your possession. While this can be a helpful option, there may be high interest rates attached to the loans. Be sure to read the terms before signing up for anything.

Financing Invoices

Unpaid invoices can be used for more than simply backing an ABL. When clients are delayed on paying you for services you have completed, accounts receivable financing may be an option worth your consideration. A company specializing in this service will purchase your unpaid invoices from you and provide you with a percentage of the value. You will receive the difference once the full amount has been collected from your client. This is a fast and easy way to see a boost to your capital when your budget is tight.

One of the biggest reasons people tend to explore this option is because it does not involve taking on more debt. With this service, you are being given an advance on payment for a service you have already completed. This means you will not be hurting your credit score or financial standing by financing your invoices to increase your access to cash.

Selecting the Right Option

Knowing which option is best for your future will come down to what you need to use the funds for. Some businesses find financing invoices to be a useful service to turn to in a pinch, while ABLs are best suited for stimulating capital for larger projects. Before you commit to a particular financing option, be sure to look over the details and weigh out where you are likely to see the biggest benefits down the line.

When it comes to helping your business get through difficult financial situations, it pays to know the specifics of your options. Learn more about ABLs and accounts receivable financing services to see which is best for reaching your goals.

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