Asset-based lending vs factoring: borrow against your assets, or sell your invoices.
Asset-based lending (ABL) is a revolving loan secured by your receivables and part of your inventory: you report a borrowing base and pay interest. Factoring is the sale of specific invoices: the factor verifies them and your customers pay it. ABL generally costs less, but it's for bigger, established companies: at 1st Commercial Credit, ABL starts at $3 million, while factoring starts at about $10,000 a month in sales.
Daniel Chirino · Business Development Officer, 1st Commercial Credit
Updated: October 29, 2026
Side by side
| Topic | Asset-based lending | Invoice factoring |
|---|---|---|
| What it is | A revolving loan: a line of credit secured by your assets. | The sale of your invoices. |
| Size at 1st Commercial Credit | From $3 million, for companies with about $2.5 to $10 million a month in sales. | From about $10,000 a month in sales up to $10 million. |
| What backs it | Your receivables, plus inventory that stays under 25% of your receivables' face value. | Each invoice you sell to a creditworthy customer. |
| Your customers' terms | Net 60 days or less, with recurring invoicing to the same customers. | Usually 30 to 90 days. |
| How it's priced | An administrative fee plus interest tied to the Prime rate. | A fee on each invoice that grows with the days your customer takes to pay. 1st Commercial Credit publishes rates from 0.69% to 1.59%, depending on your volume, how fast your customers pay and their credit, and says its average client pays about 2.25%, depending on how many days the invoices take to be paid. |
| Review before you start | Audits and collateral checks of your books; lenders usually charge a few thousand dollars for them. | A lighter review, often done in a day or two. |
| Reporting after | Regular borrowing base reports. | You send the invoices you want funded, and each one gets verified. |
| Who it fits | Established mid-size companies on their way to being bankable. | New and growing companies, and any company that invoices other businesses. |
Sources: 1st Commercial Credit's asset-based lending, accounts receivable financing and invoice factoring pages, and its article "5 Major Differences Between Asset-Based Lending and Other Types of Financing", read October 29, 2026. Terms are confirmed in writing before you sign.
When each one fits
Asset-based lending, if
- You sell about $2.5 to $10 million a month, with large, recurring receivables.
- Your customers pay in 60 days or less.
- Inventory is part of what you need to finance.
- You can handle audits and borrowing base reports, and lower cost matters to you.
Factoring, if
- Your volume is under what an ABL facility needs.
- Your company is new or growing faster than a lender's limits.
- Your customers take longer than 60 days to pay.
- You'd rather not deal with audits and borrowing base reports.
From the credit side: I worked on ABL deals at AmeriFactors before 1st Commercial Credit. An asset-based lender looks first at the quality of your assets, mainly who owes you and how they pay, rather than at your balance sheet ratios. That's why it can lend more than a bank's cash-flow loan, and why it asks for more reporting than factoring.
Between the two: a line on your receivables
1st Commercial Credit also offers what it calls a sales ledger line: a revolving line of $3 million to $20 million based on your eligible receivables, with an advance of typically 70% to 90%. You keep collecting from your customers, and their payments go to a lockbox it manages.
As a company grows and its reporting gets stronger, it can move from factoring to a line. If you're not sure where you are on that path, tell me your monthly sales and how your customers pay. See accounts receivable financing for the three structures.
Questions owners ask me
Is asset-based lending cheaper than factoring?
Generally, yes: 1st Commercial Credit's own comparison says ABL is considerably cheaper. But it comes with audits that usually cost a few thousand dollars, regular reporting and, at 1st Commercial Credit, a $3 million minimum.
Is asset-based lending a loan?
Yes. It's a revolving loan secured by your assets. Factoring isn't a loan: it's the sale of your invoices.
Can I keep my bank if I move to ABL?
Often, yes, through an intercreditor agreement between your bank and 1st Commercial Credit that assigns the receivables to it.
Does factoring need a minimum?
At 1st Commercial Credit, factoring starts at about $10,000 a month in sales, far below what an ABL facility needs.
How much do you sell a month?
Tell me your monthly sales, your receivables and your inventory. I'll tell you whether ABL, a receivables line or factoring fits better today.
Also read: asset-based lending · factoring vs a bank line of credit · all guides