What is Asset Based Lending?

by Michelle 21. May 2009 04:40

This is a very common question, and one that I am asked on a daily basis. 

To a business owner an asset can be many things.  It can be; real estate, equipment, inventory, personal holdings, equity, or accounts receivable.  To further muddy the waters different lending institutions often take various parts of the above assets and classify the line as an “asset based line.”  This is because as a lender any of these aspects of a business can be considered valuable collateral for a line of credit depending upon what type of underwriting standards that lender employs.

Now, knowing what the collateral can be I’m sure your question becomes; what does Crestmark Capital consider an asset for an Asset Based Line of Credit?  It’s really very simple. 

When you call and speak with us about an Asset Based Line of Credit; or ABL as it is generally known; you and I are going to be discussing your business’ accounts receivable and inventory.  Our ABL lines can be secured by your accounts receivable and inventory. Or if your business is one that does not have any inventory, such as; a staffing company or any service related company, we can also structure an ABL line just on accounts receivable.  This is often seen as one of the positive points of an ABL line as it leaves other assets of your business unsecured.  So, if you need to get an equipment loan or refinance real estate you can.

There are many benefits to an ABL line.  If you would like to talk about how this might work for your business, visit our homepage www.crestmarkcapital; to e-mail or call us.

Bookmark and Share

Tags: , , ,

Asset Based Loans | Brokers

What Is Factoring?

by Michelle 20. May 2009 04:30

As defined by Wikipedia, www.wikipedia.org; Factoring  is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business.

Okay, so what does that mean to you?

I always tell business owners who are new to factoring; our clients all have two things in common:
• They all provide a product or service to another business.
• Our clients all have a majority of their customers on payment terms.  Meaning, our clients have to wait to be paid for whatever product or service they have provided to their customer.
From this common intersection extend many avenues as no businesses are exactly the same.  All have various business challenges, invoicing processes, and diverse customers.

 

To further explain the definition at the beginning of this blog in real world terms, this is how a typical factoring transaction works:

Example:


• ABC Distribution has an invoice for $1,000.00 from their customer;
Widgets R Us.
• ABC Dist submits the $1,000.00 invoice to Crestmark to be factored.
• Crestmark enters the invoice into our accounting software, and advances 80% of the $1,000.00.

 

• ABC Dist gets $800.00 wired to their bank.  The advanced amount is available to our clients the next morning.
• Crestmark keeps the 20% (or $200.00 in our example) in a reserve account for ABC.

 

• 30 days later Widgets R US pays the $1,000.00.  Payment is made payable to ABC and sent to our lockbox.  We post the payment and assess a fee for factoring the invoice.
• In a few days time (as long as it takes for Widget’s payment to clear our bank) we release the remaining reserves to our client.

 

The bottom line result of the above example is;

ABC has the use of $800.00 of the original invoice amount within 24 hours of presentment instead of waiting the 30 days for Widgets to pay.  Assuming a 2% fee (insert disclaimer, actual fees vary) for the first 30 day period; the above scenario will net $980.00 of the original $1,000.00 invoice to ABC Dist.

If you would like to speak with us about how factoring may work for your company, please visit our homepage.

Bookmark and Share

Tags: , ,

Accounts Receivable Financing | Brokers | Types of Factoring


Facebook LinkedIn Bookmark and Share

© 2009 Crestmark Bank ® All rights reserved.    | Community Reinvestment Notice | Privacy | Legal | Member FDIC