A practical guide for external accountants and fractional CFOs who want to add value by introducing a new way to fund growth.
Your client probably won't open a meeting with, "I think I need asset-based lending." They're more likely to say, "We won the contract. Now we need to fund it," or, "Our line of credit hasn't kept pace with the business."
This scenario can be a great opportunity for you to add value. As an external accountant or fractional CFO, you already have a front-row seat to the receivables aging, inventory commitments, payment terms, and working-capital needs. Spotting the situations where asset-based lending may be a fit helps you move the conversation from "here's the problem" to "here's an option worth exploring."
Is asset-based lending a good fit for your client?
Part of adding value as an advisor is spottinga financing need before your client necessarily knows what to ask for. It helps to know the profile — and the signals — that suggest asset-based lending may be worth putting on the table.
Asset-based lending tends to be most relevantfor:
● An established B2B business, with
● Meaningful current receivables, trackable inventory, or both, and
● A recurring need to fund payroll, production, purchasing, or fulfillment before cash comes in.
It's also worth a look when the client’s existing line of credit is too small or rigid, or factoring no longer fits.
You may see the need in the numbers, but you may hear it from your client first. The common thread is simple: the business needs to spend money before the cash comes in.
How to explain asset-based lending in five minutes (or less)
Once a client is interested, you don't need to walk them through advance rates or collateral formulas. Focus on the practical benefits of the structure and what they mean for the business.
A simple way to start: "You've got value tied up in receivables and inventory. An asset-based lender may be able to use those assets to support a revolving line of credit, so you can put that value to work before all the cash comes in."
From there, these are the key ideas to explain:
Asset-based lending vs. factoring: How to clarify the difference
Clients often know about factoring before they know asset-based lending, so it's a useful comparison. Both can unlock capital from receivables, but they do it in different ways — and asset-based lendingc an also use eligible inventory. Those differences matter for control, customer experience, and cost.
Factoring can absolutely make sense in the right situation. The point isn't that one option is better — it's to help the client compare ownership, operating requirements, customer experience, and total cost for the way they'll actually use the capital.
How to understand the cost of asset-based lending
Cost is usually where the conversation gets real. The simplest advice: don't compare one headline number with another. Different products charge in different ways, so help the client translate each option into actual dollars for the amount of capital and the time they expectt o use it.
Look at charges on outstanding draws, facility or reporting fees, appraisal or lockbox costs, and any minimum-use, renewal, prepayment, or covenant requirements.
For example, if a client expects to use $200,000 for 30 days, ask a simple question: what will those 30 days actually cost? A factor rate on the full face value of an invoice, an annual rate, and a facility fee all describe different economics.
With Aion, current pricing includes a monthly facility fee and daily charges on outstanding draws. Aion reports an average effective cost of capital of about 2% for most clients, although rates and terms vary by client. The useful comparison is the total cost for the capital the business expects to use.
Assessing Aion’s line of credit for clients
If your client is interested in asset-based lending, Aion may be worth a look.
Aion offers an asset-based revolving line of credit up to $5 million, backed by eligible receivables, inventory, or both, through an integrated banking platform. Aion is generally built for established B2B companies with $1 million to $50 millionin annual revenue, with two or more years in business preferred. Accessing the line requires primary business banking with Aion.
Because banking and lending work in one system, customer payments can automatically pay down the balance and replenish available credit. As eligible receivables or inventory grow, borrowing availability may grow too, up to the approved limit.
Have a client whose growth is outpacing its current line? They can check their credit limit here with no impact to their credit score.