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Comments (3)

Aug 15, 2020 - 10:29pm

Basically factoring is when a company sells AR or some other credit due to them to another entity in order to collect early, they will obviously take a hit on the full amount though. ABL looks at a company's collateral and makes loans based on that, where it is assumed that the primary source of repayment (if need be) will come from the liquidation of the underlying assets (i.e. not a cash flow loan).

Aug 16, 2020 - 10:32am

Factoring is a short term funding mechanism for companies that need to finance working capital requirements. Factoring is collateralized by A/R based on some type of LTV formula.

ABL is typically a revolving line of credit used by capital intensive businesses and the availability changes based on the value of eligible collateral which would be defined in credit documentation. ABLs are often provided by bank lenders, whereas factoring is done by finance companies (based on what I have seen so could be wrong)

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