The main types of asset lending are:
- invoice factoring
- invoice discounting
- supply chain finance
- asset based lending
Borrow against invoices
Invoice factoring and discounting allow you to borrow up to 90% of the value of an invoice. You can offer your customers credit terms and still have most of your invoice paid on the day you raise it.
With factoring, lenders collect the money directly from your customer and pay you the difference minus charges. You get credit control services as well as finance. Be aware that some lenders may want to factor all the invoices for your business, not just for one or two clients.
Invoice discounting and reverse factoring
Invoice discounting is similar to factoring except the lender deals with you and not the buyer. Your borrowing is confidential and your customer doesn’t need to know.
Sometimes called reverse factoring, supply chain finance is often used by small companies with a large buyer. The buyer gets finance to pay the invoice early at a discount while getting extended terms to repay their bank.
Asset based lending
You can borrow money against most business assets including:
- plant and machinery
Interest rates tend to be low as the lender can take the assets if the borrower defaults.