A LENDING APPROACH THAT GOES WELL BEYOND THE STATUS QUO
According to the Commercial Finance Association — the association for professionals in the asset-based lending and factoring industry — total asset-based loans outstanding increased by 11.7% in 2017.* Clearly, more and more businesses are taking advantage of asset-based financing solutions.
Today, there are many asset-based lenders in the U.S., from commercial banks to non-banks. The types of collateral they lend against vary, and include accounts receivables, inventory, machinery and equipment. The common denominator among these lenders is their lending approach. They all focus on the lending formula — how much they’re willing to lend against the value of the assets. Yet, an over-reliance on the lending formula can be especially short-sighted, particularly when it comes to working capital loans.
“Asset-based lenders tend to focus on managing to a formula, not necessarily on monitoring and optimizing financial performance,” says Daniel R. Milberg, President of Milberg Factors, Inc., a leading private firm focused on factoring and commercial finance. Milberg Factors, on the other hand, considers the big picture — is the business healthy? Is the company profitable? What is driving their financing needs?
Milberg Factors focuses on what’s important to the success of the business. Attention goes well beyond the lending formula to evaluating and understanding the client’s financial results and cash flow projections, not just the borrowing base. With financial statements and projections in hand, both Milberg and the client can see where the performance of the business has been, where it’s headed and why, and how all that impacts funding requirements.
Having a lender who focuses on how the business is performing helps the client focus on building its business.
With a deeper understanding of what’s happening in the business, should the business experience a “bump in the road,” Milberg helps work with the client to manage through the situation. Milberg helps them keep an eye on key benchmarks that measure the business’s financial health and future prospects. Of course, the first question is always, “Is the client making or losing money, and do they expect to make or lose money in the foreseeable future?” After that, however, there are many other financial parameters that must be examined. Is the inventory “clean”? Is the overhead at appropriate levels? When companies plan and identify what they need to do to succeed, rather than just focusing on lending formulas, they see the pay-off when they’re able to produce the results they targeted.
This lending approach is a win-win for both the business and lender, as the lender is invested in the success of the business, so the borrower can concentrate on the ingredients for success. Since 1937, Milberg Factors has taken this approach with clients ranging from small, privately held companies with $5 million in sales to much larger companies with many divisions and subsidiaries and sales over $500 million, including manufacturers, wholesalers and service providers.
A true partner and collaborator, Milberg works to design a customized solution as part of an advance factoring relationship — with both cash flow projections and a borrowing base always in mind.
- Provides all the basic elements of a traditional factoring relationship — credit approval/protection, servicing of receivables, including collections and bookkeeping functions
- Offers clients greater financial leverage than a typical bank loan with fewer covenants and reporting requirements
- Allows the client to borrow funds against the factored receivables — typically up to a specified percentage of receivables
- Extends over-advance lines (credit lines in excess of receivable advances), where appropriate, against inventory
Milberg Factors is a distinctly different type of asset-based lender. We believe the main focus in any lending relationship should be on how to help keep the client’s business healthy. That starts with getting to know your business — not just working with formulas.
* Commercial Finance Association,
finance, banking, factoring, advance factoring, business communications, receivables financing, a/r management, credit management