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Alliance Partner Program

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In This Section

Welcome to our comprehensive resource on secured finance. Whether you're a business leader exploring financing options or trade association SFNet partner seeking to understand how these funding methods can support your members, you're in the right place. This page offers a detailed guide to these powerful financial tools, including educational primers, real-life success stories, and a directory of trusted lenders and factors. We aim to provide you with the knowledge needed to make informed decisions about financing and navigate the critical path to securing capital for your business goals.

Below are primers on secured finance products for Asset-Based Lending, Factoring, Supply Chain Finance and Real-Life Success Stories, click on each to learn more.


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Asset-based lenders typically use a borrowing-base formula (derived by multiplying the value of eligible collateral by an advance rate or discount factor) to structure transactions. Advance rates such as 75-80% of eligible receivables and 40-50% of eligible inventory are typical. 

ABL financing is very often more flexible than a traditional commercial business loan including:

  • Ability to borrow significantly larger sums.
  • Lower all-in costs than mezzanine loans, subordinated debt or equity.
  • Fewer restrictive covenants. Longer repayment terms.
  • Revolving loan facilities not requiring pay down unless collateral diminishes or deteriorates.

Types of asset-based collateral known as the 'borrowing-base' are:
 

A/R
Inventory
M&E
Purchase Order
Real Estate

Eligible accounts receivables are computed by the lender and an advance rate is applied to the revolving pool. Eligibility of AR is determined by the billed vs unbilled status and how long the AR is outstanding.

Lenders will determine a net orderly liquidation value (NOLV) of the inventory and provide and advance rate against this value. Advance rates will vary depending on the type of inventory (ie, raw materials, finished goods, customized products, etc).
 

Machinery & equipment loans are some of the easiest to finance given the relative ease to assign a value to the assets. Lenders will appraise the equipment and the loan size will be determined by the loan to value (LTV) ratio.
 

Purchase orders are considered an asset for some non-bank asset-based lenders. They can provide an advance rate against the purchase order value assuming the customers are large creditworthy businesses.
 

Lenders will order an appraisal on the real estate and use the loan to value ratio to determine loan size. Many lenders prefer owner-occupied real estate -- RE in which the operating business both owns the real estate and operates from that same location.
 

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Factoring is a financial service where businesses sell their accounts receivable (invoices) to a third-party company (called a factor) at a discount in exchange for immediate cash. This helps businesses improve cash flow without waiting for customers to pay.

  • Invoice Generation: The business provides goods/services and issues invoices to customers.
  • Selling the Invoice: The business sells these unpaid invoices to a factoring company.
  • Immediate Cash Advance: The factoring company advances a percentage (typically 70%-90%) of the invoice value upfront.
  • Collection: The factor collects full payment from the customer when the invoice is due.
  • Final Settlement: Once the customer pays, the factor releases the remaining balance to the business, minus fees.

Types of Factoring include:
 

Recourse
Non-Recourse
Full
Maturity
Invoice Discounting
Recourse factoring is a type of invoice factoring where a business sells its invoices to a factoring company, but retains the risk if the customer (debtor) fails to pay. If the debtor defaults, the business must buy back the unpaid invoice or replace it with another.
Non-recourse factoring is a type of invoice factoring where a business sells its invoices to a factoring company, and the factor assumes the risk of non-payment. This means that if the debtor (customer) fails to pay due to insolvency or other covered reasons, the business is not responsible for repurchasing the invoice.
Full factoring (also called "whole turnover factoring") is a type of invoice factoring where a business sells its invoices to a factoring company and outsources the entire credit management process. This means that the factor handles not just financing but also credit risk assessment, collections, and debtor management.
Maturity factoring is a type of factoring where the factor does not provide an upfront cash advance but instead pays the business on a predetermined maturity date, regardless of when the customer pays. This allows businesses to receive funds at a fixed date, improving cash flow predictability.

Invoice discounting is a financing method where businesses use their unpaid invoices as collateral for a loan, receiving an advance from a lender. Unlike traditional factoring, the business retains full control over collections and customer relationships, making it a more discreet financing option.

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Supply Chain Finance is a financing solution that helps both buyers and suppliers improve cash flow by leveraging the creditworthiness of the buyer. It allows suppliers to receive early payment for their invoices while giving buyers extended payment terms without affecting their working capital.

How Supply Chain Finance Works

  • Goods/Services Delivered – The supplier provides goods or services to the buyer and issues an invoice.
  • Invoice Approval – The buyer approves the invoice, confirming the amount and due date.
  • Financing Option Offered – The supplier can choose to receive early payment from a financing institution (usually a bank or SCF platform).
  • Early Payment to Supplier – The finance provider advances 80%-100% of the invoice value at a discounted rate.
  • Buyer Pays Later – The buyer pays the full invoice amount to the finance provider at the original due date.

Key Features of Supply Chain Finance:
 

Buyer-Led
Risk-Based
Early Payment
Extended
Platforms
A Buyer-Led Program in Supply Chain Finance (SCF) is a financing arrangement where a large buyer partners with a financial institution (such as a bank or fintech platform) to offer early payment options to its suppliers. The program is designed to improve cash flow for both buyers and suppliers by leveraging the buyer’s stronger credit rating.
Risk-based pricing is a pricing strategy where financial institutions set interest rates or discount rates based on the credit risk of the borrower or the entity backing the transaction. In Supply Chain Finance (SCF), it means that the cost of financing (i.e., the discount rate or interest rate) is determined by the buyer's creditworthiness rather than the supplier's. This approach ensures that stronger (lower-risk) buyers receive better terms, reducing financing costs for their suppliers.
Early Payment for Suppliers is a key feature of Supply Chain Finance (SCF) that allows suppliers to get paid earlier than the invoice due date at a discounted rate. This improves cash flow for suppliers, reduces reliance on expensive credit lines, and strengthens supply chain stability.
Extended Payment Terms for Buyers is a key feature of Supply Chain Finance (SCF) that allows buyers to delay their payments to suppliers without negatively impacting supplier cash flow. By leveraging an SCF program, buyers can extend their payment cycles (e.g., from 30 days to 90-120 days) while ensuring that their suppliers get paid early by a financing institution.
Supply Chain Finance (SCF) platforms are digital solutions that connect buyers, suppliers, and financial institutions to facilitate early payments and extended payment terms. These platforms automate invoice approvals, financing, and payment processing, making SCF more efficient and scalable.

Further reading on Supply Chain Finance:

https://issuu.com/thesecuredlender/docs/tsl-9-23-digital/46

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Asset-Based Lending
Factoring

 

Revolving Line of Credit

SG Credit Partners Helps Beauty Industry Company Flourish Revolving line of credit supports Patrick Ta Beauty’s momentum.

 

Innovative Inventory Financing is the Perfect Solution for High-Growth Food Manufacturer

Transaction enabled client to be well-funded and able to handle business flucuations.

 

Asset-Based Lending Deal Rescues Seafood Distributor

Rosenthal & Rosenthal shows how flexibility and compatibility can make all the difference.

 

Innovative Solutions Revitalizes Software Firm

White Oak Commercial Finance supports software company’s successful relaunch and rapid growth with a flexible factoring solution.

 

How Marco Helped Vector Global Logistics Achieve a 10x Increase in International Operations

Factor’s speedy response to borrower needs enables company’s growth.

 

Creativity is the Key to Victory for Manufacturing Firm

Factoring deal illustrates the importance of relationship building in specialty finance.