The FDIC oversees all loans structured and approved by a bank. Asset-based lending is similar to commercial bank lending. Like banks, asset-based lenders provide loans based on the collateral. The length and cost of the loan will depend on the type of collateral, credit of firm, length of time in business, total credit extended, financial performance and possibly strength of guarantor. Asset-based lenders are more flexible than banks and are cheaper than factors.
Factoring is similar to asset-based lending.
The only major difference is that the lender agrees to buy the account receivables. He charges a fee, commonly known as a discount. The advantage of factoring is that money can be raised quickly and without other collateral, says Richmond Towers' Farms. Also, since the factoring company acts as the accounts receivables department, costs can be cut in terms of hiring personnel who will be responsible for receivables. The bad news, says Amper, Politziner's Cohen, is that it is more expensive than traditional financing because of the risk involved to the lender.