While the core concept of our company financing your business is a pretty easy concept to understand, we often find that some small business owners can get lost in the details of what we do here at The Commercial Finance Group. Our host of comprehensive lending solutions, from asset-based financing, factoring, and accounts receivable financing, are designed to provide your business with the working capital that you need to make ends meet, expand your business, or do anything else with your company as you see fit.
The Commercial Finance Group Works With You And For You
You’ll find the high-level information that answers the questions we’re going to tackle in today’s blog post by visiting our FAQ page. However, we’re going to touch on them in greater detail because these all play an important role in our small business lending services, including our asset-based loan services. Want to know even more? We’re happy to talk with you about what we do! Get in touch with us by visiting this page.
Now, in hopes of elaborating on what it is that we do here at The Commercial Finance Group, let’s take an in-depth look at some of our most commonly asked questions about our lending solutions.
Are My Invoices Liened As Collateral?
In short, yes, they are. The Commercial Finance Group requires first position on invoices you have submitted to our accounts receivable financing program. In some instances, our Los Angeles lenders may elect to work with a bank or SBA lender who is also financing the end client. In these cases, the bank must be willing to subordinate its position on the accounts receivables.
To further clarify things, collateral simply refers to an asset that a borrower pledges to a lender in order to secure a loan. Collateral can be a physical asset such as a home, business real estate or equipment. Collateral can also be a non-physical asset like accounts receivable or cash in the bank.
A lien is a lender’s way of legally enforcing its right to seize a borrower’s business assets if the borrower hasn’t repaid a loan – think of a lien as an accountability measure. Lenders can file liens on specific assets, but many file blanket liens which gives them the rights to any business assets necessary to recoup the unpaid loan, if need be.
What Do Asset-Based Loans Do?
Touching on what we just covered, asset-based lending is a business loan secured by collateral (assets). The loan, or line of credit, is secured by inventory, accounts receivable and/or other balance-sheet assets. Asset-based lending is also known as “commercial finance” or “asset-based financing.” So, asset-based loans can also be described as a specialized method of providing structured working capital and term loans that are secured by accounts receivable, inventory, machinery, equipment, or even real estate. This type of funding is ideal for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, and management-buyouts and management-buy-ins.
Purchase order financing is a great example of asset-based financing. This may be particularly attractive to a company that has stretched its credit limits with vendors and has reached its lending capacity at the bank. Indeed, the inability to finance raw materials to fill all orders would then leave a given company operating under capacity. The asset-based lender would then finance the purchase of the raw material and the purchase orders are then assigned to the lender. After the orders are filled, payment is made to the lender, and the lender then deducts its cost and fees and remits the balance to the company.
In even more concise terms, asset-based lending does things like….
- Improves cash position
- Increases purchasing power
- Works to improve your credit rating
- Makes it possible to increase production and sales
- Provides professional credit checking on your customers
- Provides complete accounts receivable portfolio management
Who Needs Asset-Based Loans?
Realistically, any company with cash flow struggles or a lack of capital is a company that could utilize asset-based lending. New companies like startups are fairly typical candidates for asset-based loans because they are usually undercapitalized. Companies that are rapidly growing or expanding faster than their capacity allows for are also great candidates for asset-based loans, especially if they are waiting on payments from vendors, clients, and so forth.
Companies that have struggled to secure adequate bank financing also present a good opportunity to be financed with asset-based loans. Typically, bank loans can take weeks to even months to fully process, and the reality is that most small businesses or companies of any size just can’t wait that long to get the capital they need to continue running and growing their business.
Additionally, companies with outstanding tax problems, liens or those who are working through a bankruptcy and companies with a low or even negative net worth can also be a good fit for our asset-based lending solutions.
What Will My Customers Think If I Take Out A Loan?
The Commercial Finance Group understands that, especially as a small business in a tight-knit community, your reputation matters. That being said, we don’t believe (and call us biased on the matter) that there’s anything wrong with seeking out working capital lending solutions. Besides, doing so could mean that your company is just doing really well and you need more funds to cover expansion costs. In other words, taking out a loan does not necessarily mean that your business is struggling in any way.
For a lot of people, wondering what their customers will think is one of the most important questions in their mind. Generally, most finance companies will want the customers (or debtors) to remit directly to them. In today’s modern business environment where factoring is more widely known, this is seldom an issue. That being said, well-managed finance companies like The Commercial Finance Group will typically have a Non-Notification program available for situations where it is warranted.
Either way, factoring clients that work with us should take the time to inform their customers that a change with remittance will be taking place and that it is planned. After all, good business people know the value of open account terms and the importance of maintaining and enhancing terms. Factoring can help to ensure that the appropriate parties are paid on time if clients, customers, and suppliers all cooperate. This way, everyone benefits!
What Are The Advantages Of Asset-Based Loans With CFG Over Traditional Borrowing?
When you borrow money, typically, a lender will secure collateral equal to a minimum of three times the loan amount – a potentially hefty amount of collateral depending on what your loan amount is. Additionally, your flexibility is restricted when you borrow, and you cannot secure additional funds without renegotiating the loan.
There’s also a couple more stipulations with traditionally borrowing money. Based on the terms in your contract, you must meet monthly payment obligations. Also, your business can and will incur additional debt that could possibly come back to bite you in the future depending on how the loan amount is used.
However, when you factor with us, you actually don’t borrow any money, and there are also no monthly payments. By using your accounts receivable as an asset, that’s all we need to lend your business working capital. Plus, with The Commercial Finance Group, mailing expenses and costs associated with follow-up management on accounts are eliminated. So with our factoring services, CFG makes lending convenient and safe for your valuable company.
Stimulate Your Business And Work With CFG Today!
There are many things that set The Commercial Finance Group apart from other lending companies, but we like to think that personal accountability is one of the major things that we pride our business on. Did you know that we actually provide timely aging reports so that you know the status of all of your accounts, including online reporting? Our accounts receivable lenders want to be on the exact same page as you, and we trust that you’ll be impressed by our professional and courteous service to our clients.
So why not become the next success story through our receivables financing services? Get in touch with The Commercial Finance Group today!