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Exploring alternatives to Asset-Based Lending

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The risks and limitations of asset-based lending (ABL) are often too great a burden for borrowers. And today, with technology enabling a growing number of alternative lending options, businesses are finding less reasons to explore ABL. 

Now that we’ve explored the basics of ABL and covered its complexities and challenges, it’s important to explore existing alternatives — especially in the face of 2020’s rapid change and challenges. 

A brief overview of ABL alternatives 

To meet the challenges of a modern economy head on, businesses need flexible, relevant lending solutions. Let’s examine the landscape of credit alternatives for businesses: 

  1. Traditional loans and grants: Bank loans, government grants and investor funding have supported businesses for years. But now, accessing them is much simpler and more transparent. Government grants and loan programs are far easier to find and apply for, thanks to new technology like mobile apps and online applications.
  2. Factoring: Factoring is scaled-down ABL, where receivables are sold to a third-party (a factor) at a discount in exchange for cash. The process is manual, time consuming and it may take a week — or longer — for payments to hit your bank account. Most businesses should view this alternative as a red flag. 
  3. Credit cards: Allowing customers to pay for B2B purchases with credit cards is the fastest way for a business to extend credit, but it isn’t the best payment instrument for the buyer or seller. There are many pain points that come with using credit cards for B2B transactions, including surcharges, fraud, insufficient lines of credit and the hassle of collections. TreviPay research shows 76% of B2B buyers have experienced an issue that prevented them from making a purchase with a credit card.
  4. Payment FinTechs: An increasingly popular alternative is outsourcing credit management and net terms programs to  partners. With the right technology in place, this option can help businesses increase order to cash, reduce DSO and increase cash flow. Modern payments partners can underwrite an entire portfolio with fewer restrictions than a bank, handle processes like extending credit and even assume the risk of non-payment.

Businesses will always require more flexible and less risky options for freeing up working capital. We’ve taken the time to carefully break down the practice of ABL because of how strongly we believe in the technology we’re building as an alternative. 

The advantages of TreviPay

TreviPay builds technology that helps businesses get paid faster, while still offering  customers payment terms. TreviPay takes on much of the time and effort accounts receivables (A/R) teams spend onboarding, maintaining and vetting new accounts, while also assuming the risk of nonpayment and the responsibility for collection. In partnering with B2B organizations, TreviPay optimizes the payment experience and A/R teams to deepen customer loyalty, expand share of wallet and ultimately grow and strengthen revenue.   

If you missed our exploration of the basics of ABL and its complexities, we recommend catching up on our ABL blog series, especially if ABL is already in your working capital mix. Curious about how TreviPay can be the lending alternative you’re looking for? Contact us to request a demo

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