YOUR COMPANY IS LOOKING FOR BUSINESS CREDIT LINES VIA AN ASSET BASED LENDING SOLUTION
FINANCING SOLUTIONS YOU CAN UTILIZE TODAY
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL 7 PARK AVENUE FINANCIAL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
There is one overriding reason why asset-based lending could be your best choice for business financing in Canada.
It’s kind of our version of the ‘ Superman’ of business financing solutions! What is that reason? Simply that it works when other types of financing opportunities are not available or don’t fit your current financial status.
EVERY INDUSTRY IN CANADA CAN UTILIZE ASSET BASED LOANS
The reality is that asset based lending works for all firms in all types of industries, and is not dependent on your overall financial performance that might be the focus of more traditional-based financing.
Smaller and mid sized firms, and even larger corporations utilize asset-based loan funding. That’s a powerful statement, so let’s examine what the financing is, how it works, and answer some key questions that might help business owners and financial managers determine if this financing is the solution to many, or all of their financing challenges.
WHAT IS ASSET BASED FINANCING? IT'S ALL ABOUT GREATER CREDIT AVAILABILITY.
So let’s back step a bit. What is the asset based financing business loan solution?
Focus on one keyword in that phrase - assets! This method of financing simply allows you to monetize and draw on the market value of a company's assets in the business. Those are in very predictable categories, they are receivables, inventory, physical assets such as equipment and company-owned commercial real estate. Asset based lending for real estate can often be facilitated via a separate bridge loan.
If you have one or all of those your firm is a prime candidate and flexible financing is on the way. Facilities are commonly in either a line of credit facility or via term loans.
Inventory financing and a/r financing are the two most common categories. Equipment financing is often handled separately via a lease financing solution for firms requiring upgraded or new assets and technology.
This type of lending originated in the United States via asset based lending banks and is becoming increasingly popular in the Canadian business financing landscape. Financing the balance sheet is a solid alternative via abl loans when bank business credit can't meet your needs.
ACCOUNTS RECEIVABLE FACTORING IS JUST ONE OF THE TYPES OF ASSET - BASED FINANCING
In some cases, this method of financing is confused with a factoring line. Factoring is the sale of one of those asset categories – your accounts receivable. An asset-based line of credit lends against the face value of receivables, but also includes, inventory, equipment, etc. That is the difference!
The 7 Park Avenue Financial factoring recommended facility is Confidential Receivable Financing, allowing you to bill and collect your own receivables without notification to any parties. Not all factoring companies offer this solution. Thousands of small businesses utilize this type of financing in Canada.
THE ASSET BASED LOAN VERSUS CANADIAN BANK FUNDING - HOW DOES ASSET-BASED LENDING WORK
The prime difference in qualifying for such a facility is really the difference that exists when you compare this type of financing to unsecured loans via a Canadian chartered banking relationship. That banking relationship comes with a number of requirements that are often not needed when asset-based lines of credit are in fact your real and best solution.
Some of those traditional requirements might be profitability, years in business, the type of industry you are in, guarantees of shareholders and owners, etc. Those qualifications are not the focus of asset-based lending. However, the assets are.
ASSET BASED LENDING RATES
Interest rates on asset financing transactions are typically higher but allow your business to access more capital than might otherwise be achievable via traditional financing via a traditional bank loan, etc.
HOW DOES ' ABL' LENDING WORK ON A DAY TO DAY BASIS?
On a day-to-day basis, how does this type of business financing work? It’s quite simple. You and your asset-based lender determine on a regular basis, i.e. weekly, monthly, etc what your asset categories total - a borrowing based is then developed on those categories and funds are deposited into your bank account for use as working capital by your firm.
In Canada, a 250k facility is more or less the bottom level of this type of financing, and facilities can be arranged into the many millions of dollars. The asset-based lender develops a ' borrowing base ' based on a combination of your assets, allowing you to draw down regularly as you need day to day funds. That borrowing certificate is updated regularly, typically monthly, and can increase as your sales and current assets increase via cash flows in and out of the business.
The additional borrowing power allows your firm to explore growth opportunities it might otherwise not be able to pursue. The credit history of owners is not an important issue in ABL financing.
So if you want an easy way to remember the difference between this type of financing and a bank revolving line of credit financing solution simply remember that the bank focuses on the overall financial strength and cash flow, our facility focuses on assets!
FIXED ASSETS / EQUIPMENT / REAL ESTATE CAN BE COMBINED INTO THE ASSET BASED CREDIT FACILITY
Because your assets are being financing as the primary focus of this type of line of credit facility you will have to report on those assets probably on a much more regular basis, so your firm should be in a position to prepare regular reports on receivables, and inventory turnover, etc.
When fixed assets are being financing, i.e. unencumbered equipment you own, etc then in many cases, an initial appraisal will be required. On very large deals a field exam might be required. This small-dollar investment though can generate thousands or hundreds of thousands of dollars in working capital. The liquidation value of equipment and real estate assets is determined by the lender and might require an appropriate appraisal.
CONCLUSION - ASSET-BASED LENDERS
Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can help you facilitate the type of asset-based lending/cash flow financing that meets your business needs in the Canadian business financing environment for smaller and mid sized companies.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is an asset-based lending approach?
ABL asset based lending is a way for companies to financing growth needs including larger orders or contracts . Assets of the business are margined for high credit availability - these assets typically include accounts receivables, inventories, fixed assets and machinery, and in some cases real estate. Small business and medium sized businesses in Canada utilize this methof of financing, and lenders focus on assets in the event a borrower defaults.
How big is the asset-based lending market?
In 2020 KKR + Co estimated that the asset based financing market is a 4.5 Trillion dollar industry with strong growth projections for hard and physical assets in business.
