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Jeffrey Sweeney is an investment banker with years of experience in direct lending and corporate finance for small- to middle-market companies. He is the chairman and CEO of US Capital Partners, an innovator in small- to middle-market business lending. US Capital Partners has been providing prompt, innovative, and reliable financing solutions across the United States and abroad for more than a decade.

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Alternative Financing Myths in Wall Street Journal: Today's Asset-Based Lending is Not Your Grandmother's Factoring

I recently read a Wall Street Journal article that called asset-based lending a "last resort" finance option.

I wanted to respond to Kyle Stock's description of asset-based lending, which perpetuates the old wives' tales about alternative lending. Asset-based lending is not your grandmother’s factoring  anymore – it’s a modern product now.

In Asset-Based Lending Grows in Popularity, Stock states:

"Asset-based lending, once considered a last-resort finance option, has become a popular choice for companies that don't have the credit ratings, track record or patience to pursue more traditional capital sources. Because asset-based lenders focus on collateral, rather than credit-worthiness, they do deals that more traditional lenders shy away from. Borrowers put up equipment, inventory, accounts-receivable and other liquid assets in exchange for the money. Drawbacks include relatively high rates, and the ability of lenders to legally seize assets if the borrower misses payments."

People need to understand that asset-based lending is not a last resort, it's an ALTERNATIVE. Businesses can secure working capital that is slightly more expensive than (or in some instances at same price as) a commercial bank - but with more availability, meaning they can borrow more money from alternative lenders than the bank will loan out. 

Stock also states that:

"Many small businesses that seek asset-backed loans are distressed companies, or have spotty or short track records. "

There is nothing wrong with businesses that need alternative financing. What alternative financing does is gives you choices – especially in a depressed market, when the banks are weak or when bank loans aren't an option. 

What Stock overlooks is that commercial banks are not always the best choice. Sometimes alternative financing is a better option than traditional bank loans and could be a better financing solution for your company. 

There is an education void when it comes to options for small- and mid-cap financing. What would be helpful to businesses that need working capital are solutions and a better understanding of the alternative financing landscape. There is a whole range of products out there (and not just your grandmother's factoring). 

What we need is more content in the media and an educational effort to help people understand the types of alternative financing available. 

So what do you do if:

A) Bank borrowing is not an option
B) Your bank has asked you to leave (and no other bank with take you)
c) When banks say “no”

You actually have a ton of choices - including a whole menu of alternative financing options for small business.  What are you choices when it comes to alternative financing? You can get more cash for the same assets (or a variety of assets that the bank doesn’t favor). And sometimes you can pay the same, less or more (depends on your credit risk profile) than a traditional bank.

Asset-based lending is a vibrant part of the economy that’s only growing. It’s often a preferred alternative to the bank – and definitely not a last resort. Sometimes it is a last resort – but in that case, thank goodness it’s available. 

This is a huge industry, it’s growing, and it’s definitely not your grandmother’s factoring.

If you would like to know more about how your business can secure the funding it needs, visit US Capital Partners, Inc. at or call (415) 882-7160.

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