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Alternative Lending In  Canada : Asset Based Loan Funding
Alternative Financing Options - Your Guide To Alternative Finance Solutions For Your Business




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asset based loans alternative finance loans funding





Alternative finance loans in Canada come in a variety of different solutions.


Growing or even starting a business is a challenge in any environment, let's not even talk about pandemics or recessions!  The ability to access the right type and amount of financing is critical - Companies that don't have the proper amount of ' business credit ' find they are constantly challenged by traditional financial institutions such as banks.

The bottom line? You've got funding options so let's dig in.




Simply, businesses can access all the funding they need outside the traditional regulatory environment of business lending - giving business owners and financial managers financing services in a variety of structures. Those solutions eliminate the gaps in business around your firm's particular debt and equity position. In recent years these alternative business financing solutions have become more abundant, accessible, and affordable.




There are numerous reasons why a business can't access all the business capital they need from traditional financial firms such as banks that offer traditional bank loans and a number of other business solutions.

Those institutions are regulated and the credit policies and procedures around lending to businesses can be cumbersome and time-consuming - Businesses that don't have the balance sheets, profits, and cash flow benchmarks that banks and business-oriented credit unions require will always have a challenge.   It is very common for banks to want to see several years of revenue, profit growth and healthy cash generation.


The ability to use an asset-based loan to generate sales and profits is a key part of the benefits that come from funding your business with non-traditional offerings, which are clearly gaining traction every day in Canada. Let's dig in.




Asset based loans via alternative  business finance tend to focus of course on your existing business assets versus bank loans which are often unsecured  - Two of those assets, receivables and inventory are a constantly moving target. Also coming into play are fixed assets/equipment and occasionally real estate.


What is the main challenge around business growth? We can safely say that a quite correct answer to that question is how you both finance, as well as manage business assets. The most obvious way to generate cash flow and working capital from your business is to directly monetize accounts receivable via a cash flow factoring facility.


Canadian chartered banks of course offer traditional and very desirable operating facilities. But in many cases companies looking for SME COMMERCIAL FINANCE solutions - i.e. not the big boys, simply can't access some or all of the bank credit they need. The most common 'liquid' solution for many firms is receivable financing, aka 'factoring'. Be forewarned there a number of different types of factoring, some much better than others from various perspectives.


Although asset-based financing in its many derivatives (bridge loans, factoring, financing against equipment equity, inventory advances, etc.) may be a more costly method of financing your business we can categorically say, that the textbooks will back us up on this one, that equity financing is much more expensive! A business either borrows funds, or injects owner equity into the business, and equity capital can be expensive when considering its dilutive nature relative to total ownership.


The reality is that the right amount of debt is in fact a great way to optimize leverage and increase return on investment and return on equity - a great way to measure owner and manager performance.




The key benefit of asset based lending is its ability to generate cash flow for you when you need it.  Cash flow and working capital needs ebb and flow daily, weekly, monthly, annually, seasonally... you name it, it is always changing. When you send invoices, build up inventory, buy equipment, or pay suppliers, that is all part of the cash flow conversion cycle in any business.



Your ability to focus in on assets that can generate cash when you need it is a true working capital success scenario. The best thing you can do in preparing to consider a true asset based loan or asset based lending facility is to ensure you can properly demonstrate the ongoing sources and uses of your funds and in particular the turnover of those funds.


We mentioned A/R financing, known as 'factoring' as probably the most popular and most used alternative finance vehicle. But a word of advice -  choose the right factoring partner and firm - which is best done by speaking to  7 Park Avenue Financial,  a trusted, credible and experienced asset based lender in Canadian business financing.


In many other forms of business financing receivable advances are limited to formulas and tied to the financing performance of your company - that is not the case with cash flow factoring.


Don't forget to also check out a number of other often used alternative finance funding solutions - Talk to the 7 Park Avenue Financial team about business financing solutions from alternative finance companies  -  There are numerous financing services and solutions for your business - It's important to be knowledgable to which solution best fits your firm before committing to a financing solution -




Those solutions? They include:


Invoice financing /factoring -  Firms with growing sales and accounts receivable can access cash immediately without worrying about the delays in payments from clients


Non-bank business lines of credit  - Alternative business credit lines that are focused on business assets without the emphasis on ratios, covenants, personal guarantees and outside collateral versus the traditional business model around bank credit lines.


Working Capital Term loans.- These are cash flow-based loans for short or intermediate terms - ie 1-5 years - they have fixed rates and while interest rates are at  higher rates  these are unsecured loans based on the cash flows of a business


Merchant cash advances.   - The Merchant cash advance is  a very short cash flow loans, unsecured, typically with a 1-year duration via a lump sum amount borrowed - ie a relatively short period  - payments are tailored to the cash flow of a business - Many retailers used this method of financing - Busines owners must not have poor credit


Recurring Revenue Financing / Saas Finance - this is a peer to peer lending cash flow solution tailored for ' fintech' type firms who are growing rapidly and have a recurring revenue client base - This eliminates the need for equity financing and also brings no debt to the balance sheet - many technology and software firms utilize revenue financing solutions rather than choose equity crowdfunding platforms to raise funding.


Inventory loans


Equipment Finance (new and used)


SR&ED tax credit financing


Sale leasebacks


Royalty Financing


Bridge Loans - Alternative Financing Real Estate Solutions






Some companies choose to explore angel investors and venture capital for raising money or even government grants which can be a long drawn-out process for firms wishing to qualify for government funding from federal and provincial governments, or equity financing. An alternative for the business owner is  Industry Canada, which sponsors the Canada Small Business Financing Program for small business owners in new or growing businesses. 


To apply for Canadian Business Financing government loans under the program borrowers must understand the qualification required under this loan, which is a term loan in nature that finances equipment, technology, leasehold improvements, and real estate with monthly payments/interest payments typically for 2-5 year terms. Many entrepreneurs and owners of small businesses looking to purchase franchises also utilize the program that offers repayment terms customized to the loan.


Borrowers should have a good understanding of the use of funds and a solid business plan is often required - Business plans should include cash flow projections and owners should be able to demonstrate business experience and have some industry knowledge around their specific market sector.  Many traditional lenders will often require a business plan.





Is your business right for alternative finance solutions - if you can't meet the requirements of traditional banks and if your company is looking for easier qualifications and realistic approval times talk to 7 Park Avenue Financial and investigate the benefits of alternative finance loans for Canadian companies, which may come in a format that works for your business financing success and your business loan needs?




What is alternative funding?

Alternative funding solutions are non-bank financing options that businesses can access either online or via trusted business financing advisors .  The processes  are often faster than traditional banking /traditional loans and these alternative  loans from non bank lenders compete with banks  (who are regulated )or business financing solutions for Canadian industry


What is the most popular form of alternative financing?

The most popular form of alternative financing is invoice financing /factoring, which is a subset of asset-based lending. This allows a firm to receive payments on outstanding invoices and smooths out the cash flow needs of a business. This type of financing eliminates the wait for billed goods and services to a company's clients. Companies using receivable financing can grow without the need to worry about the investment in their accounts receivable.


What is the role of alternative finance?

Alternative financing providers round out the solutions provided to Canadian businesses by traditional banking sector offerings - This alternative credit market offers finance options for businesses outside traditional funding sources - Alternative financiers are often private funding and are not regulated, unlike banks in Canada.

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Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil