How do you know what Collateral Position works best with your business?>/h2>
This question is a very important one which can directly affect the way your business operates. This is often overlooked by smaller business. Knowing whether to look for an invoice financing company that encumbers all of your assets or only your receivables can save you time, money, and lead to a healthier working capital relationship.
In the finance industry, collateral is secured by a UCC filing and typically filed on your receivables or all assets of the company. One is not inherently better than the other but knowing the difference can make your business life much easier.
All assets filing is exactly what it sounds like, the lien encumbers all of your business’s assets. If you are not planning on interchanging equipment, acquiring new equipment, or seeking any new financing, then this is generally the best and most cost effective option.
A receivables fling is also just as it sounds. The UCC will cover your accounts receivables or invoices. This is a great option if you are planning to frequently interchange equipment, acquiring new equipment, or working with other lines of finance. This option leaves all of your assets open excluding the receivables.
Now that you have considered what kind of invoice financing line you need and what kind of collateral position will work best for your business, there is still more to consider like whether recourse or non-recourse financing will work best. Having all of the critical information is key to finding the best factoring company for your business.