Lender typically takes a security position in the assets owned by the business. Contract Financing Funds are advanced to you as work is performed. Payments by the contracting party are generally made directly to the lender. Factoring Factors actually buy your receivables and rely on their own credit and collection expertise. Essentially, your customers become their customers.
Factoring is used by firms who are unable to obtain bank financing.
The cost of financing is usually higher than other forms of S-T financing. Term Loans Used to finance your permanent working capital, new equipment, buildings, expansion, refinancing, and acquisitions. Commercial banks are the major source of funding. The term of the loan is based on the useful life of the assets being financed or collaterized. Your projected profitablity and cash flow are two key factors lenders consider when making term loans.