Accounts Receivable Factoring – essentially selling your accounts receivable – is often a solution for companies in need of financing, but for larger companies with a stronger credit rating and more comprehensive financial reporting and internal controls (monthly financial statements, aged A/R and A/P summaries), Liquid Capital’s Asset-Based Lending (ABL) solution provides an excellent financing option that is more cost-effective, flexible and discreet than factoring.
It is not always just small companies that find themselves long on orders but short on working capital. Many larger companies, with substantial client lists and sophisticated financial structures, still find themselves in situations where payables pre-date receivables. They simply don’t have the working capital to keep up. They may fall just shy of bank loan criteria, or if they do qualify, they have seasonal or otherwise time-sensitive capital requirements that the rigid structures of traditional bank loans can’t accommodate.
ABL: A Step Beyond
ABL provides all the advantages of factoring when it comes to leveraging the value of your accounts receivable, as well as providing additional financing by leveraging all your assets – including inventory, equipment and real-estate.
Larger ABL clients with strong financial reporting and internal controls may qualify for non-notification financing. With non-notification, you handle invoicing and collection activities and are paid directly. Payments are then deposited into a “sweep account” (typically at your bank) from which Liquid Capital collects. Your client is not aware that Liquid Capital is handling your financial transactions.
A further advantage is that – since our risk is lower due to your good credit and strong financial reporting – your rates can be significantly lower than they would be with a pure factoring solution.
For smaller ABL clients, the advantages of factoring are combined with the ability to secure additional funding by including your inventory, equipment or real-estate. Although these deals may not qualify for non-notification financing, the client benefits by receiving a larger amount of funding than if it were solely an accounts receivable factoring solution.