A traditional method of financing, factoring allows you to get cash from your receivables.

  • Used by the garment and floor-covering trades, sporting goods, appliances, wholesale jobbing, building supplies, and many other areas.

Types of factoring 

  • Non-borrowing. The factor collects the accounts and pays them over to you.
  • Borrowing. The factor purchases your receivables and advances a specified portion of the total, perhaps 80%.


  • Credit approval must come from the factor.
  • Factors are an excellent source of credit reports.
  • Invoices are usually stamped “Pay... Factors.”
  • Costs include both management fee and cost of borrowing. Be sure to inquire about the actual fee structure.
  • Factors handle all the accounts receivable associated with the issue of the original invoice.
  • Factors may guarantee loans for their clients.
  • Factoring can affect your normal bank lines of credit. Check with your banker before proceeding: your bank may be able to offer you similar options.

Asset-based lending 

Asset-Based Lending (ABL) is a specialized form of secured lending based on the tangible assets of a company (inventory, equipment). ABL may be viable alternative when:

  • additional funds are needed to finance growth or acquisition, or
  • your business has suffered a setback


  • Interest rates and fees are higher than traditional loans; however borrowing availability is generally higher.
  • Lenders usually require an independent appraisal to determine net value of assets.
  • Advance rates are based on the net realizable value of assets as they relate to inventory, machinery and equipment.
  • Monitoring is at a higher level in order to manage collateral positions and company performance.

Warehouse Receipts Financing 

A form of finished goods inventory financing.

  • The lenders keep a close tab on your stock after an assignment to them.
  • May advance up to 80% of the value of the stock from time to time (i.e., a higher proportion than under normal borrowing).
  • Can vary up and down according to circumstances.