1. Why Factoring Might Be a Better Fit Than an Asset Based Loan
Knowing which method of lending is the best for your business isn’t as simple as it sounds. Many
companies looking for alternative financing or “a bridge back to the bank” automatically think of an
asset based lending facility. Often these companies are surprised to learn that a factoring line of
credit can be a more cost effective and operationally efficient way to access working capital and
accelerate cash flow.
First let’s distinguish between two forms of financing:
ABL is a business loan or line of credit that typically uses inventory and/or accounts receivable
to formulate the borrowing base.
Factoring is the sale of a receivable, to a third party. You get cash from the factor today and
your customer in turn pays the factor directly.
If you are not using inventory to obtain liquidity, factoring provides the same liquidity as an ABL but
with the right factor, factoring will be less expensive than ABL.
Benefits of borrowing base factoring
After aggregating invoices, an appropriate borrowing base is a line of credit determined by the total
amount of outstanding invoices. It’s the same concept as borrowing from a bank, but borrowing base
factoring provides other flexible benefits that banks can’t, including:
 Immediate access to daily cash flow
 Control over size & timing of each advance
 One-time discount fee on the advance
 Monthly interest charge based on average cash outstanding
 Alternative verification process for guaranteed same-day funding
While availability of funds is the same for asset based lending and factoring facilities, there are some
significant differences in the costs and processes involved:

2. Asset Based Lending Borrowing Base Factoring
Company pays between $15-$20,000/year for
quarterly multi-day day field exam.
Independent auditor required to review
financial statements and collateral info.
No field exams necessary. A factor “audits” by
periodically confirming A/R with your
customers.
Company pays for heavily negotiated legal
documents
Minimal (if any)
No notification Notification
Client prepares weekly borrowing base and
support (A/R, Inventory, A/P)
Client sends all invoices to the Factor who
creates the daily borrowing base
Clearly for companies with accounts receivable as the only collateral, the cost and effort involved in
asset based lending would simply make factoring a better fit than an ABL line of credit.
For more information, contact Eddy del Rio at 786.529.6448
Eddy Del Rio
Senior Vice President
Gibraltar Business Capital
Gibraltar Business Capital | 9100 S. Dadeland Blvd, Ste 1500 | Miami, FL 33176
786.529.6448 | edelrio@GibraltarBC.com |
www.GibraltarBC.com