Comparing Lines of Credit, Asset-Based Loans, and Factoring

There are many financing options available to you as a business owner. The trick is knowing which service is the best fit for your unique needs. Financing services that you may have considered include asset-based loans, invoice factoring, and opening lines of credit. To know which option will help you get the financial boost you require, you need to know the details. Look over these facts and gain a more in-depth understanding of each of these financing services.

Asset-Based Loans

Also known as an ABL, an asset-based loan is a form of financing that acts as a number of other traditional options. Essentially, you will offer a lender an asset of value as collateral for the loan you require. The total amount of the loan will be determined by the worth of the assets. In the event that you cannot pay off your loan, the collateral becomes the property of the lender. Typical assets to use for obtaining an ABL include real estate, equipment, and invoices.

Credit Lines

Another option when you are in need of financing is opening a credit line. Lines of credit are one of the more popular options when it comes to improving the cash flow of a business. This service acts much like a traditional credit card. You are given a credit limit and can use the funds however you see fit. When you make payments on the credit line, your available funds increase again and you can continue to use the credit. When exploring this option, be sure to pay close attention to interest rates and fees.

Factoring

Finally, factoring your invoices is useful when you are dealing with customers who have not paid for services. You can sell your invoices to a company that specializes in factoring and receive a portion of the value in cash. The company will collect the rest of the debt, provide you with the difference, and take a fee for the service. This can be a useful option for many because it is not a loan, it is an advance on money you are owed. Plus, you can utilize this service whenever you’re looking to boost your available capital.

Financing can make all the difference when it comes to helping your business stay ahead of the competition. Whether you’re looking to expand your offices, invest in equipment, or cover routine expenses, the right financing can be useful. Look into the details surrounding factoring, ABLs, and lines of credit to determine which service will prove the most helpful for your goals.

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