ABL Ins and Outs: FAQs of Asset Based Lending

Posted - January 31, 2023

Are you a business owner looking to finance your business needs? Have you considered asset based lending as an option to finance your growth, but are wondering how it works and what the advantages might be? Asset-based lending can be a powerful tool in helping businesses reach their goals. It offers more flexibility than traditional financing methods, allowing companies to secure funds without taking on additional debt or giving away equity. In this blog post, we’ll look at the ins and outs of asset based lending – answering some of the most frequently asked questions so that you can make an informed decision about whether it’s right for your business.

ABL Funding Solutions

How does asset-based lending differ from traditional bank financing? 

Asset-based lending (ABL) provides a much more flexible approach to financing a business’s current operations and needs for growth. In contrast to traditional bank lending, where the borrowing company’s operations are evaluated and its future cash flow is projected, asset-based loans are based on the collateral, typically the business’s accounts receivables and inventory. Typical advance rates range from 70- 90% on eligible accounts receivable and 50-60% against eligible inventory. This type of loan typically takes the form of a revolving line of credit, which is refreshed when the collateral, e.g., the receivables, are paid down. While asset-based lenders also lend against other types of assets, including capital equipment, and real estate, account receivables are frequently the most significant proportion of collateral for these loans, primarily because of their greater liquidity, followed by inventory. 

Who can benefit from asset-based lending? 

Asset-based lending (ABL) at Goodman Capital Finance has opened up the financial world to numerous businesses looking for new sources of capital. Asset-based lending is a great way for those with substantial assets or sets of assets to use as collateral, allowing access to much needed capital that can often be quickly obtained.  This financing solution can be tailored to the specific needs of each business, meaning all types of industries may benefit from asset-based lending services including, manufacturing and transportation, staffing and apparel/consumer goods, as well as oil field services and business services. Asset-based lending provides flexible financing options including, non-recourse loans and lines of credit, specifically adjusted for the unique needs of each business. No matter what stage your business is in, asset-based lending from Goodman Capital Finance can help bring it to life. 

How can asset-based loans be used? 

Asset-based loans can help bridge the gap in working capital when traditional banking lenders are unable. Often, asset-based loans are perfect solutions to  short-term liquidity issues allowing companies to stay afloat and continue advancing their business objectives. Asset-based lending can be used for a broad array of purposes, including providing working capital, paying off existing creditors, payroll, trade payables, funding current operations, or making inventory acquisitions. It truly is an effective financing solution for many small businesses when utilized responsibly and with appropriate guidance from experienced banking professionals. 

What companies are good candidates for asset-based lending? 

The most successful candidates for asset-based lending are typically mature companies with a predictable, sustainable cash flow and tangible assets such as real estate or inventory. Companies that are growing rapidly and lifestyle businesses are particularly suited for asset-based lending. For companies that might be related to industries that banks shy away from, this type of lending can offer an alternative to traditional bank loans – rather than relying primarily on your credit score, asset-based lenders use the collateral as the basis of their credit assessment. With asset-based lending, businesses can access more funds, receive flexible terms and interest rates, and gain better control over their banking process.  Asset-based lending is a valuable strategy for any business that meets the criteria outlined above. 

How can asset-based loans help my business? 

Asset-based lending can provide numerous advantages to help your business grow and succeed. Asset-based loans allow businesses to borrow funds almost immediately against current assets such as accounts receivable, inventory, or equipment they already own. This type of financing empowers companies to access the cash they need without needing collateral other than their existing assets.  

What are the benefits of asset-based lending? 

Borrowers benefit from asset-based loans in a variety of ways. Asset-based lending provides immediate and ongoing cash flow liquidity for a company’s working capital. While a bank’s lending process may be lengthy and cumbersome—taking up to several months in some cases as the bank analyzes the borrower’s financial statements, credit history, and generally the entire business—asset-based lending requires comparatively less time to conduct the transaction. Further, because asset-based lending loans are based on collateral, lenders are often willing to be much more flexible and work with a borrower during a  turnaround or transition period.  Since asset-based loans emphasize the quality of the collateral, fewer financial covenants are required of the borrower.  Asset-based lending lenders typically require a much more limited degree of reporting back to the lender as compared with traditional bank lending. 

Invoice Factoring

How does invoice factoring work? 

Invoice factoring is a reliable and cost-effective form of financing that gives businesses access to working capital quickly. It is an alternative to traditional bank loans, offering an invoice-based solution for any company seeking to bridge the gap between invoice billing and invoice payment. This process starts by submitting your outstanding invoices to Goodman Capital Finance. We will then pay you 90% of the invoice amount due from the customer upfront in exchange for receiving those payments directly from customers. With invoice factoring, businesses can easily ensure steady cash flow and meet their daily obligations – making it an ideal financial solution for businesses of all types and sizes. 

What does invoice factoring cost? 

Many companies with clients that have open invoice accounts turn to invoice factoring as a financing solution. Invoice factoring with Goodman Capital presents an ideal option for businesses needing liquidity, but it comes with some costs. These costs are variable, depending on the credit quality of your client base, and the monthly funding volume. But you can be assured that with Goodman Capital Finance, there are no application costs and zero hidden fees.  

How are factoring interest rates calculated? 

Factoring interest rates are an essential part of invoice factoring, as it is how invoice factoring companies determine the cost of their services. Generally, invoice factoring companies calculate their rates based on two factors: the invoice amount and how much credit risk is involved. For example, a lower rate may be offered if the invoice amount is high and there’s no credit risk attached to the job; however, if the invoice amount is lower with more credit risk, a higher rate may be charged. Goodman Capital will break down each factor so that customers know exactly what they’re paying for. 

Does invoice factoring create additional debt? 

Invoice factoring is an increasingly attractive financial tool with the potential to provide businesses with extra financial flexibility and stability. However, there is a common misconception that invoice factoring creates additional debt; in reality, invoice factoring allows you to access funds owed to you more quickly instead of waiting on payment by your customers. Rather than creating debt, invoice factoring facilities provide easy access to capital for your working capital needs, providing greater control over cash flow without taking on additional conventional debt. Through invoice factoring, companies have the potential to utilize the cash from unpaid invoices sooner, unlocking growth potential and increasing efficiency. 

Do I have to factor all of my invoices? 

Invoice factoring is a great way to unlock cash flow and turn your invoice payments into immediate cash. But the question remains – do you have to factor all your invoices? The answer is no, you don’t. You control which invoice to use for the invoice factoring service. It is important to remember that invoice payments can take up to 90 days.  However, by taking advantage of invoice factoring, you can get immediate cash within 24 hours with Goodman Capital when needed.  

How long does it take to get approved and setup for invoice factoring? 

At Goodman, we hold ourselves to the highest standard. When you factor with us, you can expect a 24-hour approval process.  Assessing credit history, data collection, and the completion of paperwork are all included. Since invoice factoring is designed to help businesses increase their cash flow quickly and efficiently, working closely with Goodman Capital Finance can ensure you get up and running fast! 

How long do factoring companies take to pay? 

At Goodman Capital Finance, we pride ourselves on quick and efficient service, getting you the financing you need to keep your business on level ground. Our approval process takes 24 hours after we have received invoices. Contact us for more information on our quick and easy factoring process. 

What should I look for in a factoring company? 

When choosing a factoring company to partner with, there are some key things to consider to ensure that you make the best long-term decision for your business. Firstly, you should select a factoring company that is well-respected and trusted by other businesses in your industry. Make sure to research the factoring company’s reputation and read reviews from other customers. Additionally, take time to analyze the fees associated with factoring services and their customer service policies. Ultimately, finding a factoring company that you trust and is experienced in providing factoring services of high quality is essential. That way, you can be sure you will receive the factoring support needed while managing cash flow successfully in the ever-changing business world.

Payroll Funding for Staffing Agencies

How do startups get payroll funding? 

Startups often don’t have the capital to handle wages and salaries for their employees, making payroll funding a critical part of their financial stability. One popular form of payroll funding for staffing agencies is staffing factoring.  This involves selling staffing invoices to a staffing agency in order to receive an upfront payment for the invoice. This allows startup owners to access immediate funds without waiting for extended payment cycles. At Goodman Capital, we credit qualify the customer base and determine if we can support ongoing billing. 

How much does payroll funding cost? 

The cost of payroll funding depends on several factors, including the size and creditworthiness of your staffing agency. It’s essential to determine a budget before shopping for payroll funding resources to ensure you’re getting the best possible deal for your staffing needs. By assessing your staffing agency’s current financial situation and budget requirements, you’ll be able to make a more informed decision about payroll funding solutions.  The cost of payroll funding services depends on various market trends and personal financial circumstances. This makes it difficult to pinpoint an exact cost figure; however, staffing agencies should be prepared to pay a fair price based on their individual needs to obtain quality services. 

How is payroll funding different than a loan? 

Payroll funding is a type of staffing factoring arrangement where staffing agencies work with staffing financiers, like Goodman Capital, as invoice payers instead of relying solely on their clients. We agree to purchase and pay the staffing agency’s invoices at an agreed-upon discount rate. The financier collects full payment from the staffing agency’s client and then pays the staffing agency out of the proceeds. The same day the staffing agency submits invoices to their clientele, Goodman will advance 90% of the invoiced amount to ensure they have working capital on hand to cover payroll as well as other expenses. 

Where can I get money for payroll? 

If you’re looking to secure money for payroll, staffing factoring may be the solution you’ve been searching for. This is the practice of leveraging staffing agency invoices as assets to secure capital from third-party lenders. Depending on the staffing agency’s size and length of time in business, staffing factoring with Goodman Capital Financing can potentially provide access to monies for payroll and other necessities.  

ABL in Staffing Agencies

What is invoice factoring in staffing? 

Invoice factoring in staffing is often referred to as payroll funding.  It is a specific financing strategy used by staffing agencies to turn unpaid client invoices into cash without waiting weeks or even months for their payments. It is the advancing of money based on the amount being invoiced weekly, bi-weekly, or monthly to have capital on hand to handle one’s payroll expense. Invoice factoring can also enable staffing companies to invest in marketing and expansion efforts while waiting for client payments. Ultimately, staffing factoring offers staffing agencies an important solution for mitigating the unpredictability of when their receivables will be paid, allowing the staffing agency to continue its operations uninterrupted. 

How much does invoice factoring for staffing companies charge? 

Staffing factoring rates with Goodman Capital Financing are competitive in the market and provide tremendous value to our clients. The actual rate ranges are based on the staffing agency’s customer base and the funding needed per month.  

What types of businesses use invoice factoring? 

Invoice factoring is a versatile tool used by businesses of many different types and sizes. It is particularly popular among companies with a B2B model in which they invoice and then wait for payments.   Manufacturing, transportation, staffing, and construction companies regularly use invoice factoring to maintain a steady cash flow and are particularly suited for invoice factoring.  

What is a good rate for invoice factoring in staffing? 

There is so much that goes into a factoring rate. What is even more important than the actual rate is that you pick the right partner for your business, one that you can trust, has a proven track record, good communication, and total transparency. At Goodman Capital, we pride ourselves on making these a priority. 

Do you need good credit for invoice factoring in staffing? 

When looking for staffing factoring, you may think a good credit history is necessary. However, staffing companies often have different requirements than traditional lenders for financing. At Goodman Capital Finance, we largely base our approval decision on the credit quality of who you are working with, so the client’s personal credit is secondary. 

How long does it take to factor an invoice? 

At Goodman Capital, we advance funds to our clients the same day they submit their invoice to us. This is one of the aspects that sets us apart, as many lenders have variable timelines for making funds available.   

How can staffing firms use money from factoring? 

Staffing firms frequently struggle with cash flow due to invoice cycles, which are often weeks or months long. Invoice factoring is an excellent tool for alleviating those problems. By using invoice factoring, a staffing firm can receive an advance of funds against unpaid invoices or accounts receivable. This influx of cash allows the firm to pay its vendors and employees immediately, allowing for uninterrupted operational costs and reliable staffing for clients. It can also be used for various essential expenses, such as insurance, marketing, and sales. 

ABL in Oil Field Services

How do you qualify for oilfield invoice factoring? 

Seeking invoice factoring can be a savvy financial decision for oilfield service companies. Qualifying for assistance from an oilfield invoice factor lender depends on the creditworthiness and overall financial structure of the company seeking this help. Goodman Capital Finance looks specifically at your customer credit and if you have an invoice and backup for completed work. If these qualifications are met, your business will qualify for factoring. 

What are typical factoring fees? 

Factoring fees can range depending on the oilfield invoice factoring service provider. At Goodman Capital Finance, this can vary depending on the credit quality of your client base and the monthly funding volume. Contact us for more information on what your rate and fees would be.  

How does factoring work for oil and gas service companies? 

For invoice factoring with Oil and Gas Service Companies, Goodman Capital Finance provides a powerful financial tool with multiple advantages for the company. Goods and services are provided to customers on credit which leads the company to collect the invoices at a future date. The invoice factoring service from Goodman Capital Finance takes this process to the next level, ensuring quick access to funds during times of financial distress or when resources are needed for business growth.  Invoice factoring transfers short-term accounts receivables from Oil and Gas Service Companies to Goodman Capital Finance in exchange for immediate cash inflow within 24 hours. This can help companies maximize profits while allowing greater flexibility in managing their business operations, such as payroll, rent equipment, and mobilization. 

Is oil and gas factoring right for your company? 

If you’re running a business that relies on oil and gas transactions, invoice factoring can give your company the cash flow boost it needs to get back on track and invest more heavily in the industry. With invoice factoring from Goodman Capital Finance, you’ll be able to access funds quickly for upcoming payments or unexpected expenses. Whether you need extra capital for expanding, managing cash flow during demand fluctuations, or seasonal lows, invoice factoring will help provide a viable solution. Furthermore, invoice factoring allows immediate payment of invoices as soon as they are issued, with no need to wait up to 60 days to receive full payment. Enabling swift invoice payments allows businesses in the oil and gas industries to manage their opportunities better while freeing up much-needed resources. 

Where and how does my money get funded? 

With Goodman Capital, we make the factoring process fast and easy. All funds are directly wired to your bank account. 

To learn more, contact us today.