What is Your Rate?
This is the main question when searching for a commodity finance product such as a commercial or home mortgage. Let’s face it, if I am refinancing my home mortgage, I do not care about the customer service of the mortgage company because I expect them to competently manage my mortgage needs. Further, I would not pay more for a perceived better customer service experience. My main concern, as with all of us when shopping for a mortgage, is rate.
However, in the entrepreneurial lending world, things are much different. For example, as a business owner looking to deliver on a sizeable purchase order you have been pursuing for months, cost is not the primary concern. Availability of cash is. This is because if you fail to deliver on your first purchase order, you will likely never receive another one from the same customer. Your reputation on being able to deliver is what keeps the orders coming in.
Asset based loans, such as invoice factoring, solve most liquidity problems for B2B business owners. We deal with business owners on a daily basis that are under extreme timeline and performance pressure from a customer they have been pursuing for months. Once the opportunity finally comes, they simply must deliver! They view their invoice factoring partner as a team member versus just an asset based lender. Because without the factoring company, they would not be able to deliver on their customer orders.
Our asset based lending sources need to earn a return that is commensurate with the risk they are taking. It is a return that will both assist the borrower in their growth goals and earn the lender enough to justify the risk of capital. A flexible invoice factoring loan that allows the borrower a chance to expand their top line revenue where one did not exist before through traditional financing avenues.
So, the rate discussion is obviously something that is covered, but not nearly as important as it is with commodity lending. Opportunity cost, or the cost required to earn higher profits for the company, is of primary importance in asset based lending. Invoice factoring is the most commonly used forms of asset based loans.
If your business could use a flexible invoice factoring company to grow and meet your full potential, we would like to speak with you!
To your success!
Patrick Zazueta | Founder
Huntington Coast Capital, Inc.