advance balance line的意思|示意

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Advance Balance Line: Its Usage Explained

An advance balance line (ABL) is a type of loan specifically designed for businesses. It’s a revolving credit line that can be used for working capital and other expenses. The distinct feature of an ABL is that it’s often secured by the business’s current and future total account receivables, inventory, and other assets. So, if the business fails to pay back the loan, the lender can secure repayment by liquidating the business’s assets.

ABLs are often used by businesses that find themselves in need of working capital but can’t qualify for traditional loan products. Such businesses might include those with bad credit histories, new businesses with little or no track record, or those with seasonal income.

The main advantage of an ABL is that lenders are more likely to approve one than a traditional loan, since the lender is secured by the business’s assets. In addition, ABLs typically offer a low interest rate and don’t require that monthly payments be made. Instead, businesses regularly pay a percentage of their monthly sales to the lender. That percentage, called a \\"payback rate,\\" is determined at the time the loan is approved.

As such, ABLs are an attractive option for businesses that need working capital and don’t have the cash flow to support a more traditional loan product. However, given the risk associated with these loans and the fact that lenders can seize a business’s assets if the loan isn’t repaid, businesses should consider their options carefully before committing to an ABL.