You Are Looking for a business line of credit via Asset Based Finance!
Asset-Based Lending vs. Traditional Loans: A Comparison"
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
Unaware / Dissatisfied with your financing options?
CONTACT US! - Direct Line - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
Email - sprokop@7parkavenuefinancial.com
"Asset-based lending empowers businesses to transform their assets into essential capital, fostering growth and operational stability."
"Imagine unlocking your business’s full potential by leveraging assets you already own. Asset-based lending makes this a reality, offering a lifeline to growth and success."
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Different Types Of Asset Based Lending solutions that solve the issue of working capital – Save time and focus on profits and business opportunities
Exploring Asset-Based Lending as a Working Capital Solution in Canada
Asset-Based Finance: A Solid Working Capital Solution
Asset based finance is a solid working capital solution for a business line of credit as an alternative to bank financing. An ABL (asset based lending) line of credit provides an operating line of credit facility for a combination of both receivables and inventory. This can be achieved in Canada via a traditional receivable financing facility for firms that have both domestic and out-of-country receivables.
The Role of Asset-Based Lending in Business Growth and Acquisition
Often this type of facility provides cash flow when your company is growing, or perhaps wants to acquire another firm... even a competitor. If we had to label many clients that are searching for the right asset based finance facility we would quite frankly put them in the category of being in a turnaround or restructuring situation.
Leveraging Asset-Based Financing for Negotiating Power and Cash Flow Enhancement
Proceeds from this facility can be viewed in many positive ways, one of which is to simply give you leverage and negotiating power with suppliers for pricing and discounts ... and why? Because you now have cash flow that allows you to buy smarter, purchase larger quantities of materials - all of which are on top of your newfound ability to feel more comfortable about day-to-day financial burdens such as payables, salaries/wages, etc.
Asset-Based Finance Solutions Versus Traditional Financial Solutions
Overcoming the Limitations of Traditional Financing
Many Canadian companies that approached asset based finance solutions have often exhausted traditional financial solutions such as cash flow lending via banks via unsecured loans, etc We stress to clients that asset based finance solutions are the last thing from ' lending of last resort'. They in some cases can be more cost-effective, and almost 99% of the time, in our experience, provide clients with more liquidity and access to capital.
The Advantage of Not Diluting Ownership
And don’t forget in understanding asset based lending that when you approach asset-based finance from a business receivables or inventory financing point of view you are no longer forced to consider scenarios such as raising additional equity and diluting ownership ... And that’s a good thing if you're a business owner in Canada.
How Asset-Based Finance Solutions Provide More Liquidity
So how exactly do asset based finance solutions provide that much more liquidity, than say... a traditional Canadian chartered bank line of credit? They do that by margining your receivables at higher levels, or margin rates than banks, and also include additional borrowing on that same facility based on inventory, equipment and real estate, all of which are rolled into one day today's borrowing facility.
Qualifying for Asset-Based Financing
To qualify for this type of financing, it becomes a question of controls and reporting. Your firm should be in a position to report on an ongoing basis on aged receivables, payables, inventory counts, etc. It's that level of business control that will get your firm the highest asset based finance facility.
Transitioning to a Canadian Chartered Bank Facility or Tier One ABL Facility
Look at business receivables financing via an ABL facility as a type of financing that becomes the bridge for your firm to either move to a Canadian chartered bank facility or a true tier-one ABL facility with comparable bank rates and structures.
Key Takeaways
-
Collateral Evaluation: Understanding the value of assets used to secure loans is fundamental. Assets can include inventory, accounts receivable, equipment, and real estate.
-
Loan-to-Value Ratio (LTV): This measures the loan amount against the value of the collateral. A vital concept, it influences lending decisions.
-
Credit Analysis: Evaluating a borrower's creditworthiness is critical, even with collateral. This includes examining financial statements and credit history.
-
Risk Management: In ABL, managing the risk associated with the collateral and the borrower's ability to repay is essential.
-
Cost of Capital: Understanding the interest rates and fees associated with asset-based loans helps gauge the financial impact on borrowers.
Conclusion
When you are not aware of all the possibilities available to your firm for a business line of credit option call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can help you reach the higher ground in asset-based financing in Canada.
FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION
How can asset-based lending improve my business's cash flow?
Asset-based loans provide immediate funds based on your assets' value, enhancing liquidity without sacrificing equity.
What assets can be used for securing an asset-based loan?
You can leverage various assets, including inventory, accounts receivable, physical assets such as equipment, and even real estate, for loan security.
Why might asset-based lending be preferable to traditional bank loans?
With its focus on collateral rather than credit scores, asset-based lenders offer more flexibility and quicker access to capital.
How does the asset valuation process work in asset-based lending?
ABLenders assess the market value of your collateral, determining loan amounts based on a percentage of that valuation.
Can startups and small businesses benefit from asset-based lending?
Yes, especially if they have significant assets but lack a long credit history, making traditional financing challenging to obtain. Early-stage companies use accounts receivable financing, which is a key subset of asset-based finance in Canada.
What are the typical interest rates for asset-based loans?
Interest rates vary widely, influenced by the collateral's value, the borrower's financial health, and market conditions.
How quickly can I access funds through asset-based lending?
Depending on the lender and your assets, funding can be secured in as little as a few weeks.
Is there a risk of losing my assets with asset-based lending?
Yes, if loans are not repaid and the borrower defaults the lender has the right to seize the collateral to recover their funds.
Can I use future sales or invoices as collateral for asset-based lending?
Invoice financing is a popular form of asset-based lending that uses outstanding invoices as collateral and delivers maximum loan financing based on accounts receivables.
How do I choose the right asset-based lender?
Consider lenders' expertise in your industry, the flexibility of their loan terms, and their reputation for customer service.
How does asset-based lending differ from factoring?
Asset-based lending involves loans secured by various assets while factoring specifically involves selling your receivables at a discount for immediate cash.
What's the impact of asset-based lending on a company's balance sheet?
It can improve liquidity and operational flexibility, but interest and fees affect overall costs and financial health.
How do asset-based lenders determine the loan-to-value ratio in asset-based lending?
Lenders evaluate the quality and resale value of the collateral, setting a ratio that reflects the perceived risk.
