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ASSET BASED LOAN SOLUTIONS IN CANADA
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Financing & Cash flow are the biggest issues facing business today
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An asset-based business credit line is one solution to what many business owners / financial managers tell us is their 'mountain of pain' regarding revolving credit facilities that make sense for their company. ‘ABL ' asset-based lending is the one alternative to achieving a working capital line that makes sense. Let's dig in.
THERE ARE NUMEROUS TYPES OF ASSET BASED LOAN AND LENDING SOLUTIONS
There are subsets of asset-based credit that also work for many businesses in Canada. ABL financing rose in popularity in the United States and gradually has become more popular in non-bank Canadian business financing solutions. The primary one is invoice financing, which focuses specifically on accounts receivable, and unlike ABL, does not take into account borrowing against your inventory, equipment, and other assets. While invoice factoring works for thousands of firms, it falls when the business owner/manager finds that financing the business is too inflexible. Even real estate business equity can be included as a part of this funding.
DON'T PICK THE WRONG TYPE OF ALTERNATIVE LENDING
Getting into the wrong facility can become either too expensive or, in some cases, cumbersome. If there's one primary reason businesses shy away from invoice financing, they don't want the financing to have any involvement with customers, suppliers, etc.
DO YOU UNDERSTAND INVOICE FINANCING / FACTORING
We can commiserate with these clients because the ability to keep how you finance your company private is probably how you want to run your business. If there is one other perception of invoice financing on its own, many firms don't understand what it does and, as importantly, how it works and how it is priced.
ASSET BASED LENDING VERSUS BANK FINANCING
How are commercial finance firms offering ABL creditable to compete with banks? Top experts tell us that the ' risk spread ' on banks lending to smaller firms is less attractive than lending to large commercial borrowers.
ASSET BASED LENDERS FILLING THE VOID IN BUSINESS FUNDING
Asset-based lenders fill the void when small to medium-sized businesses find they cannot secure ' traditional' loans.
WHAT IS AN ASSET BASED LINE OF CREDIT
So that brings us around to the ASSET BASED BUSINESS LINE OF CREDIT, which finances your a/r, inventory, and equipment under one revolving credit facility. In many ways is the perfect alternative to ' credit hungry ' Canadian business. A ' borrowing base ' is established, typically monthly, based on your sales and assets - your firm draws down on those assets. It's a perfect way to finance the balance sheet and capitalize on a combination of your sales and assets.
WHO USES ABL FINANCING
Top experts tell us that thousands of firms are now fully utilizing asset-based lending facilities - primarily in the start-up and SME Commercial marketplace. At the same time, many would also be surprised at major corporations that utilize this type of business borrowing.
THE RISING POPULARITY OF ABL FINANCE
This ' bundling ' of your assets into one borrowing facility provides liquidity and borrowing power that is more often than not 100-200% more than you could achieve at a bank facility. It is also well suited to Canadian businesses that sell into the U.S. as no real distinction is made between U.S. and Canadian receivables if you're working with the right partner. Solutions via asset-based lenders typically come with a higher interest rate - for the business owner, it becomes a question of access to capital versus cost of capital.
CONFIDENTIAL RECEIVABLE FINANCING
And paramount to all of this is the fact that the facility is ' CONFIDENTIAL ' concerning your business running on its own, billing and collecting your own receivables to enhance cash flow. For more on financing accounts receivables in this manner and on Confidential a/r financing, click here.
If you're looking to understand the key advantages of asset-based financing and the ABL business lines of credit vs. your ability to access bank finance from traditional Canadian banking, seek out and speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in removing that ' mountain of pain ' around working capital needs in Canada.
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