A department within California Bank of Commerce, CBC Business Credit offers asset-based financing to a broad array of businesses. Asset-based financing provides working capital by leveraging the assets in your business. CBC Business Credit will utilize your accounts receivable, inventory or equipment to provide secured working capital and term financing for your business. When used strategically, asset-based lending will enable a business to:
- Maximize borrowing capacity
- Fuel growth and profitability
- Increase liquidity
- Increase financial flexibility with credit lines that can grow with your business
- Provide solutions to cash flow timing challenges
CBC Business Credit will work with you and your team to customize a solution that fits your needs. Our relationship approach to banking means we share our knowledge and experience with you to help you grow and manage your business.
CBC Business Credit – FAQs
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Asset Based Lending Frequently Asked Questions
ABL is lending secured by an asset. This means that if a loan is not paid, an asset can be taken in its place. ABL allows your company to have available cash between the time of payment and expenses. This involves lending off of accounts receivable and bridges the gap between delays in selling a product and receiving payment for it. Instead of waiting for an actual payment of an invoice, your company can borrow based off of the value of the actual invoice. ABL is beneficial to the business client because it allows for growth without unnecessary risk.
In commercial lending the credit worthiness of the borrower is the deciding factor in getting a loan. In contrast, an ABL line looks at the credit worthiness of the borrowers debtors. This is to ensure that the borrower’s customers can pay back the obligated invoices. A traditional line of credit would have a credit limit set by the accounts receivable size over a period of time, whereas an asset based line would have a revolving credit limit that reflects the current accounts receivable. Also, an ABL line has to be monitored closely since the line often reflects daily changes. One must constantly review the status of the borrower’s accounts payable, accounts receivable and inventory. A traditional commercial line would not require this level of review.
In factoring, a business sells its accounts receivables at a discount. Factoring is not a loan, it is the purchase of an asset. Asset based lending is an actual loan that the borrower can use on a daily basis. The borrower is still collecting on the invoices, but the cash goes directly to the ABL group and is then applied to pay down their line. Depending on the terms of an asset based loan, a borrower would not have to tell their debtors that their invoices are owned by the ABL group. In factoring, the debtor would directly pay the factor (financial institution) for the full value of the asset.
A company must have an asset that the lender would be able to recoup funds with, if the borrower were to default on the loan. Industries that would qualify includes manufacturers, temporary employment agencies, and various types of retail sellers.
Businesses that would not qualify are professionals (i.e. Attorneys, CPAs), medical industry and construction. These would not qualify because there is no tangible asset to guarantee payment. Usually these industries would have a contract stipulating what requirements must be met in order to receive payment. An ABL line would require a hard transaction that guarantees an amount is rightfully owed.
CBC Business Credit Contact Us
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Executive Vice President / Direct: 408-380-8640 / Fax: 408-292-2645
Senior Vice President, Operations Manager / Direct: 408-380-8631 / Fax: 408-292-2645
Senior Vice President, Sales Manager / Direct: 408-380-8642
Vice President, Business Development / Direct: 408-380-8671 / Fax: 408-292-2645