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The idea of factoring is a turn off for a lot of companies as it means in most cases that their customers will be contacted and instructed to pay the factoring company directly for all payments on account.

The reality is that while this may seem a bit invasive, almost every type of business out there does some amount of accounts receivable financing in one form or another to cash flow their business financing requirements.

And when you talk about asset based lending, the primary and most valued asset that can be financed is an account receivable because it is a sale that has been made to a credit worthy customer that is obligated to pay and has a history of strong and timely repayment. These transactions can also be insured in many cases, further strengthening the ability to borrower money against them.

And even when asset based lenders say they will finance against inventory, equipment, real estate, and purchase orders, there will likely not be any financing considered unless there is a substantial amount of accounts receivable involved in the transaction to make the repayment cash flow work.

The key for business owners is to find the cheapest form of factoring that is the least disruptive to the business and to the business customers.