Asset-Based Loan: Financing Solutions for Canadian Businesses | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR WORKING CAPITAL BUSINESS FINANCING IN CANADA!

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ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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ACHIEVING OPTIMAL WORKING CAPITAL VIA ABL FINANCING

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

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           EMAIL - sprokop@7parkavenuefinancial.com

"Smart business owners don't just see their inventory and receivables as operational necessities—they recognize them as powerful financial tools waiting to be leveraged."  Warren Buffett

THE RIGHT BUSINESS LOAN AND WORKING CAPITAL SOLUTION FOR YOUR BUSINESS? 

Are you a business owner or financial manager looking for cost-effective financing solutions for your business capital needs?

When Traditional Financing Fails: The Asset-Based Solution

Problem: Your business needs capital to grow, but traditional lenders keep saying no based on your debt ratios or limited operating history. Each rejection delays expansion plans, forces you to miss opportunities, and pressures daily operations.

Solution:   Let the  7 Park Avenue Financial team show you how Asset-based loans unlock the value hidden in your balance sheet, converting inventory, equipment, and receivables into immediate working capital.

2  Uncommon Takes on Asset-Based Loans  

1. Asset-based loans can actually improve financial discipline and a company's cash flow within your organization by encouraging better inventory management and accounts receivable practices, as lenders require regular reporting on these assets.
2. While typically associated with struggling companies, the majority of asset-based loans today serve healthy businesses experiencing high-growth phases that traditional banks consider too risky vis a vis  bank cash flow lending.

In Canada, companies in the SME sector have a choice between a broad range of traditional bank-type financing, which often comes with an unsecured loan and a lower cost, and, in some cases, alternative financing solutions from non-banks, which provide the capital for businesses unable to attract all of the financing they need.

In many cases, businesses might be experiencing good growth and prospects but not possess the track record and overall business credit rating that qualifies for traditional funding and an unsecured working capital loan transaction.

So what is the solution?  It just might be secured loans, ie an asset-based loan/asset-based line of credit based on your sales and valuable assets. Times have never been more challenging as firms battle pandemic consequences, recession, higher interest rates and tightening commercial credit availability- 

At 7 Park Avenue Financial we meet clients who in fact have some financing in place from commercial banking, business-oriented credit unions, etc but are unable to achieve the additional capital they need.

Growing sales and slow-paying clients create a ' double whammy ' on business cash flow, resulting in fluctuating cash flow and working capital.

The need for additional funding might often be an asset-based lending solution based on sales and asset values.

Structured as either a term loan or a business line of credit revolver facility on multiple forms of the firm's existing assets in accounts receivable, inventories, fixed assets, and equipment can provide solid collateral for the Asset-based lender finance solution.

CASH FLOW  VS ASSET-BASED LENDING FOR YOUR WORKING CAPITAL NEEDS?  

A secured business loan strategy will often reward Canadian business owners and financial managers with an excellent rate -

However, business owners and financial managers should remember other financing options, such as ABL finance. Rates, terms, repayment, etc., are critical, but numerous other solutions can provide the business capital you need. 

At 7 Park Avenue Financial, we're constantly preaching options!

Of course, secured loans involve assets, and the word ' collateral ' comes to mind.

HOW TO UNDERSTAND THE DIFFERENCE BETWEEN  ABL LENDING AND TRADITIONAL BANK FINANCING  

Many business owners are attracted to the flexibility of an asset-based lending solution, which allows them to achieve their cash flow/working capital needs.

While banks focus on historical and present cash flows coupled with an emphasis on personal guarantees, outside collateral, etc., the ' ABL ' approach achieves financing growth differently—with a focus on the balance sheet!

Your more liquid assets, such as receivables and inventory, provide a superior level of margin and borrowing ability  -

Typical advances are in the 85-90%  range—significantly higher than the bank's. Most importantly, your borrowing capacity grows automatically—there are no pre-set credit limits!

By the way, service companies can still benefit from these facilities.

REQUIREMENTS AROUND THE LENDING PROCESS

Understanding the strength and quality of your balance sheet assets is key to approvals under working capital solutions via asset-backed loan facilities -

Lending standards vary significantly compared to traditional financial institutions - The term '  covenant light structure ' is popular in asset finance cash flow solutions - much less reliance placed on debt-to-equity ratios,  borrowing covenants, or the amount of equity in the business -

Borrowers who can demonstrate good sales revenues and produce proper accounting and asset schedules are rewarded with borrowing power.

So, what exactly do lenders look at when they consider your firm's entire picture and, of course, the collateral?

They look at your overall industry, the business's financial credit history, and, of course, the general picture of cash flow.

While the current craze of 'online lenders' seems extremely popular, these lenders look mostly at the cash flow coming in and out of your business.

They will often do this simply by reviewing bank statement history. These lenders are essentially unsecured - they promise to pay from the company and its owners but seldom any collateral.

Asset-based lending solutions make it possible for SME COMMERCIAL FINANCE borrowers and mid-sized companies to consider new equipment, expansion, or simply financing inventory and receivables as their businesses grow.

Most businesspeople are unaware that non-bank asset-based lines of credit often come at a cost, but they can, in fact, provide unlimited amounts of capital that are in lockstep with their sales and growth plans.
 

That is the finance optimism business owners, and their financial managers seek!

The Asset-Based Finance company solution can best be described as a one-stop solution, given that it combines the ability to finance inventory, receivables, equipment, and, if applicable, commercial real estate.

More firms than ever are looking to these types of solutions even when they are challenged in financial performance and can't access traditional Canadian chartered bank financing.

Companies look to these ' ABL ' (asset-based lending) solutions as an alternative to having owners raise additional equity. Often, the business might have enough debt already, and asset financing solutions monetize assets.

 HOW DOES ASSET BASED LENDING WORK

It is a non-bank solution with an independent firm and provides you with 90% receivable financing and inventory borrowing that’s based on the actual collateral valuation around the value of your inventory, not some predetermined cap or limits that many banks impose on the face value of assets 

(That’s because banks generally can’t understand your inventory values and eligible collateral- ABL lenders do!). 

KEY BENEFITS OF ASSET-BASED LOANS - MAXIMIZE YOUR BORROWING CAPACITY 

So why choose asset-based lending ?

Flexible financing!

Understanding the key benefit of asset-backed loans for ongoing cash flow needs is critical given that the ABL  cost of borrowing is generally higher - not always, but most of the time! 

The ability to achieve dependable cash flow to run your business on a day-to-day basis removes the financial stress of fluctuating sales and collections - 

Key benefits of a working capital ABL facility for cash flow financing are ongoing purchases from supplies, meeting the demands of new contracts and larger orders, and maintaining positive relations with your suppliers.

The majority of business borrowers in Canada understand the time it takes to approve bank credit lines or term loans.

Non-bank working capital facilities on the company's assets via an asset-based lender are generally considered easier to obtain. Financing is often very customized to the physical assets on the balance sheets and the borrower's business model or industry dynamics.

That is why working capital financing via asset finance is one of the best options for many businesses. 

Case Study on Asset-Based Loan Benefits

Challenge: A mid-sized Edmonton-based manufacturing company with $12 million in annual revenue faced a critical growth opportunity when a major client wanted to triple its order volume. However, traditional bank financing was unavailable due to the company's recent investment in facility expansion, which temporarily reduced its debt service coverage ratio below bank requirements.

Solution: The company secured an asset-based loan structured around its $1.8 million accounts receivable, $2.2 million inventory, and $3.4 million manufacturing equipment. The facility provided an initial advance of $4.1 million with a floating borrowing base that would increase automatically as inventory and receivables grew.

KEY TAKEAWAYS  

• Borrowing Base Fundamentals - Understanding that your available credit fluctuates with the value of your pledged assets (typically 70-85% of eligible accounts receivable and 50-60% of inventory value).
• Different assets carry varying advance rates – receivables generally command higher percentages than inventory, while specialized equipment often falls in between.
• Regular asset reporting represents a critical compliance component, usually requiring monthly borrowing base certificates and periodic field examinations.
• Eligibility criteria determine which assets qualify as collateral, excluding aged receivables (typically >90 days) and obsolete inventory.
• Advance rates reflect the liquidation value of assets rather than book value, ensuring lenders maintain adequate security margins.
• Asset-based loans operate as revolving credit facilities, allowing businesses to draw funds as needed rather than taking a lump sum.
• Real-time collateral monitoring systems have revolutionized this lending model, enabling higher advance rates through improved transparency.
• Proper covenant structuring focuses on asset performance metrics rather than traditional financial ratios, providing greater operational flexibility.

CONCLUSION -  COMPETITIVE FINANCING TERMS FOR YOUR CASH FLOW NEEDS  

Speak to 7 Park Avenue Financial,  a credible, experienced and trusted Canadian business financing expert with a track record of financing success.

Secured small business loans and other finance options are just around the corner!

  

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION  

What is asset based lending?

Asset-based financing solutions are business loans that can be term loans or lines of credit. These facilities are backed by the company's balance sheet, with a focus on specific assets such as accounts receivables, inventories, fixed assets and equipment, and commercial real estate.

 What are the benefits of a working capital loan? 

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