It’s a cost effective alternative for you to increase working capital without slowing growth or raising equity.
Benefits of asset based lending
Asset based lending gives you fast access to working capital. With an eye on growth and your changing needs, the amount of finance grows in line with your assets. It’s inherently more flexible than traditional lending products, a stable alternative to ease seasonal cash flow flauations. Asset based leading could also help you raise more credit than traditional lending options.
| ELEMENT | FACTORING | INVOICE DISCOUNTING | ASSET BASED LENDING | OVERDRAFTS | LOANS |
|---|---|---|---|---|---|
| Amount of credit available | Up to 90% of your invoices available immediately. The balance ( Less fees of course) is payable later | Up to 90% of your invoices available immediately. The balance ( Less fees of course) is payable later | From 60% - 80% of the asset valuation | By negotiation sometimes limited to 50% of book debt | By negotiation |
| Flexibility | Your facility may grow in line with your sales | Your facility may grow in line with your sales | For stock, the amount available moves in line with your business | Limits can be increased, but this incurs extra costs. Typically re-negotiable once a year | Flexible business loans allow early repayments |
| Security required | On your invoices and in some cases, modest personal guarantees and fraud warranties required | On your invoices and in some cases, modest personal guarantees and fraud warranties required | Typically security is only required on the asset | Typically this requires security, which may include a charge on property | Typically this requires security, which may include a charge on property |
| Sales Ledger administration | Can be done | Typically, this will include sales ledger | Not included | Not included | Not included |
| Penalties | No penalties levied | No penalties levied | Could be levied | Unauthorized limit can attract penalties | If payments are not made on the due date, penal rates might apply |
| Settlement | Deducted from the advance payment made | Deducted from the advance payment made | On the agreed date/dates, may be monthly, quarterly | On the agreed date/dates, may be monthly, quarterly | On the agreed date/dates, may be monthly, quarterly |
| Tax Implications | interest and admin charges are tax deductible | Interest and admin charges are tax deductible | Interest and admin charges are tax deductible | Interest is tax deductible | Interest is tax deductible. Early interest allocation may be higher |
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