Asset-Based Loan Companies: Unlocking Business Potential | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR AN ASSET-BASED LENDER SOLUTION!

A COLLATERAL FINANCE LOAN SOLUTIONS BASED ON SALES AND ASSETS

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 NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

Asset-based loan companies harness organizational assets to provide crucial funding solutions, enhancing financial stability and growth opportunities for businesses.

Struggling with business financing? Discover how your company's assets can unlock essential capital today!

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ASSET-BASED LOAN   solutions that solve the issue of cash flow and working capital  – Save time and focus on profits and business opportunities

Asset-Based Loan Companies: Your Solution to Cash Flow Challenges  

 INTRODUCTION

Asset-based lenders might well be the best-suited financial solution to fix your working capital needs.

Asset-based lending involves loans or credit facilities that are secured by collateral agreements with your business.  Our goal here is to demonstrate how asset-based lending works!

Asset-based loan companies offer a potential financial lifeline to businesses - allowing a company to leverage its sales and assets as collateral for loans.

This form of financing, which includes invoice financing among other asset-based lending solutions, provides companies with the capital they need, when they need it, by turning receivables and other assets such as inventory and equipment into immediate cash flow..

All companies face fluctuating cash flows and irregular sales and collection cycles, so asset-based loan companies stand out as a critical resource for maintaining operations and allowing a company without the requirements of traditional lending financial institutions such as banks.

 
ASSET-BASED LENDING VS TRADITIONAL  LENDING

 

We know that you might be a bit confused about this type of loan financing (It's not really a loan), and you want to know which companies in Canada best suit your working capital needs. So we're sharing, dare we say it, some 'trade secrets! Let's dig in

 

Everything seems to be going ' viral ' these days, and we strongly feel that asset based lines of credit from Canadian asset based lenders are right up there - to put it simply, they are ' trending up ' in popularity when it comes to working capital needs and the financing of working capital via the balance sheet.

 

Understanding the basics of this type of solution is the real challenge. How do you pick the right solution, and who do you deal with?  That's the business challenge facing business owners and financial managers.

 

 

So, again, what is the service offering really about when you're looking for an asset based lender? It's a bit simpler to understand than you think.  Typical customer profiles for clients we talk to who are looking at asset finance are, of course, 100% familiar with a bank operating line of credit - that's been available forever - if, and it’s a big if, you qualify for traditional loan structures.

 
CASH FLOW LENDING VS. ASSET BASED BUSINESS LENDING - THERE'S A BIG DIFFERENCE
 

 

However, did you know that commercial loan financing companies offer asset-based lines independent of our Canadian chartered banks? It's a solid way of maximizing borrowing capability you may not have considered.

 

They do that based on the true value of loan collateral - i.e. your receivables, inventory, and in many cases, fixed assets or real estate that don't have other liens on them. Simple as that. Inventory finance is based on the type of inventory your firm might carry, and the financing of inventory is based on pre-agreed-upon borrowing margins. Financing for retailers is available from asset-based finance firms.

 

So what exactly is the difference then? Aren't we talking about the same thing here? The key differences are simple, and that's why hundreds, probably thousands of firms are moving to this type of working capital and cash flow facility.

 
WHY ARE ASSET BASED FINANCING SOLUTIONS BECOMING MORE POPULAR

 

Easier approval: for example, credit risk in banks and credit risk variables in traditional finance are often unable to be met by many middle-market firms looking for flexible financing solutions.

 



Fewer covenants/restrictions/personal guarantees - bank covenants focus on debt and equity rations as well as other financial statement benchmarks - Asset based lending is very covenant finance lite!

And external collateral? None!

 

In many cases, the need for a commercial real estate loan in the form of a bridge loan can easily be established to fulfill a short-term funding need.

 

More liquidity and borrowing power! A borrowing base certificate is established, usually monthly, on which your sales and assets are benchmarked as the borrowing base limit for that month. That borrowing base calculation is on your pre-agreed upon borrowing margins of a/r, inventories, the value of fixed assets, etc. - allowing you to pay for and cover operating expenses, payables, etc.

 

Asset-based lenders will perform proper due diligence on your sales and assets via your application. Financial statements are examined, as are aging for your receivables, inventory, payables, and customer deposits /payments.

 

Let's cover those last two points a bit more; they are the ones that most intrigue our clients who are considering the switch. Asset-based lenders approve many firms for more working capital than the client would have received from a bank. Oftentimes, approvals are based on facilities that never would be approved by a bank in any circumstances.

 

Don't believe us? Many firms, even those in special loans or coming out of bankruptcy, can, in many circumstances, access asset-based lenders. Why? Because they have the one thing, an ABL (that's the acronym for the industry) needs ASSETS! The most typical reason for accessing this credit line is Growth needs!

 


 
WHY ASSET-BASED CREDIT LINES & LOANS WORK

 

For companies looking to improve liquidity, there is no particular size of business required. If you're a business selling to businesses, aka B2B and are in business for at least a couple of years and are unable to obtain traditional bank financing, you're an ABL candidate.

Growing businesses in high growth or facing other challenges are strong asset-based loan candidates for an operating line of credit for your firm.

 

The factors that affect who you are best to deal with are as follows: your facility's size, the current financial situation your firm is in, where you are located, and the mix between A/R, inventory, and those other assets you might have on hand.

 

These types of facilities work best when they are in the 250k and up range. And by the way, up in our case means anything up to 50 Million dollars or more!

 
SUMMARY - KEY BENEFITS OF ASSET-BASED LOANS

 

Major focus on improving access to liquidity

Flexible term structures around  revolving credit lines and term type loans

Pricing based on overall asset quality and turnover

Ability to expand your business with financing tailored to your business needs

Any size of business can consider ABL financing

 

If your firm doesn't qualify from a size perspective, there are still some unique business financing strategies for current assets that make sense. These include:

 

A/R Financing / Accounts receivable factoring/ Selective invoice discounting  - Confidential  invoice financing is a key subset of ABL finance

 

Inventory Finance

 

 PO Finance

 

SR&ED Tax credit financing

 

Sale leasebacks

 

Working capital cash flow loan solutions - merchant advances, etc



 
IS ASSET-BASED LENDING RIGHT FOR YOUR COMPANY?

 

Understanding why ABL finance might be right for you involves assessing issues in your business around cyclicality, the profit margins in your business and industry, and whether you have needs in the area of turnarounds and restructuring your overall capital structure.

In some cases, major growth opportunities may have presented themselves on the horizon, and owners/management want to be opportunistic in this regard.

In all cases, there is no equity dilution in your business when ABL financing is utilized.

KEY TAKEAWAYS

CONCLUSION

 

Call  7 Park Avenue Financial,  a trusted, credible, and experienced Canadian business financing advisor. You'll be on the road to improved working capital health in a short time!

Learn how ABL finance can be your short-term saviour for cash flow/working capital needs based solely on sales and business assets.

 

Let our team show you how you can manage through times of growth or major challenges in your company or industry via optimal working capital solutions.  Find out how asset turnover gives you working capital financing to have the money you need to run/grow a business based on values of outstanding invoices, inventory, and A/R.

 
FAQ: Frequently Asked Questions

 

 

What is asset-based lending?

 

Asset based lending is the financing of the assets of your business ( the collateral ) such as receivables, inventories, fixed assets/equipment, and real estate. Also known as ABL Finance, these facilities are revolving credit lines or term loan structures.

How does asset-based lending work?

 

Asset based loans or credit facilities secured by the sales and assets of your firm allow a company to borrow against pre-agreed upon margins based on the value of assets - Typical margins for the balance sheet assets are 90%  for receivables and 30-60% for inventory. Equipment and real estate assets are appraised and provide further borrowing power under term loans or line of credit facilities.

 

What are asset-based lending interest rates?

 

Interest rates vary on asset-based financing solutions. Final rates depend on the quality of assets and asset turnover around receivables and inventory and the general credit quality of the business. On balance, ABL rates are higher than traditional bank financing but provide financing otherwise not available from Canadian banks. Some Canadian banks have abl originations as part of their commercial loans portfolio of offerings.

What advantages do asset-based loan companies offer over traditional banks?

These companies provide quicker access to funds, less stringent credit requirements, and the ability to turn various assets into working capital, making them ideal for businesses with rich asset portfolios but less conventional cash flows.

How do asset-based loan companies assess the value of assets?

They conduct thorough appraisals and audits to ascertain the market value and potential liquidity of the assets, ensuring they cover the loan amount adequately.

Can startups or small businesses benefit from asset-based loans?

Yes, especially those with solid asset foundations but limited cash history, as these loans focus on collateral rather than credit history.

What types of assets can be used to secure a loan from asset-based loan companies?

Commonly accepted assets include real estate, inventory, equipment, and accounts receivable, among others.

Are asset-based loans more expensive than conventional loans?

Typically, yes, due to the higher risk assumed by lenders in accepting assets as collateral, which may lead to higher interest rates and fees.

What is the typical duration of an asset-based loan?

Loan terms can vary widely but often align with the depreciation schedule of the secured assets or the turnover rate of receivables.

Is there a minimum asset value required to obtain an asset-based loan?

Yes, lenders require a minimum threshold to ensure the loan is economically viable to manage and enforce.

How quickly can a business access funds once an asset-based loan is approved?

Funds are generally available faster than traditional loans, often within a few days of asset verification and loan approval.

What happens if the value of the collateral decreases during the loan period?

Borrowers may need to provide additional collateral or face potential loan restructuring or repayment acceleration.

Can asset-based loans be combined with other types of financing?

Yes, they are often used in conjunction with other financing methods as stand-alone receivable financing  to cover different aspects of business needs, providing comprehensive financial solutions from the financing company.

How do asset-based loans differ from factoring?

While both provide capital based on receivables, asset based line of credit facilities use a broader range of assets for collateral and typically offer larger funding amounts under more flexible terms. Banks offer the unsecured loan facility via the bank credit line.

What impact do asset-based loans have on a company’s balance sheet?
They can improve liquidity ratios by converting fixed assets into cash, though they also increase short-term liabilities.