Invoice Factoring vs. Asset-Based Lending
Both use your receivables as collateral. ABL is cheaper but comes with covenants, field exams, and reporting overhead most shops under $10M can't support.
The quick answer
Under about $1M in monthly borrowing needs, factoring is faster, simpler, and usually the right tool. Above $1.5M–$2M with organized reporting and a controller, ABL is meaningfully cheaper.
Side by side
| Invoice Factoring | Asset-Based Lending (ABL) | |
|---|---|---|
| Facility size | $50k–$20M | $1M–$100M+ |
| Typical cost | 1.5%–3.5% per invoice | SOFR + 2%–5% APR |
| Reporting | Weekly AR aging | Weekly borrowing base + monthly financials |
| Field exams | None | At close + annually |
| Covenants | None | Financial + reporting covenants |
| Time to close | 1–2 weeks | 6–10 weeks |
| Best fit revenue | $500k–$25M | $10M+ |
When Invoice Factoring is the right call
- Under about $15M revenue
- No dedicated controller/CFO yet
- You need cash in weeks, not months
- You value simplicity over lowest cost
When Asset-Based Lending (ABL) is the right call
- $15M+ revenue with clean monthly financials
- Controller or CFO producing reporting
- You can accept covenants and quarterly reviews
- Cost of capital matters more than speed
Bottom line
We routinely transition clients from factoring into ABL as they scale past $10M–$15M. Same collateral, cheaper pricing, once you have the reporting muscle to support it.
Frequently Asked Questions
Other comparisons
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