Asset Based Lines Of Credit : Perfectly Matching Your Business Finance Needs?
Asset based Lines of Credit – Canada’s Newest Business Financing Option!
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An asset based line of credit is a newer business financing tool / solution that owners/financial mgrs keep hearing about. And they want more info - so let's dig in.
Similar to other forms of business financing that are newer and not yet in fullest use in Canada asset based financing, also called ' ABL ' financing evolves from the U.S. and the U.K. . . . The industry originally started as a simply 'factoring 'or receivable finance arrangement.
What asset based lending does is to take that basic concept of factoring and include all your other ' assets ', which traditionally are inventory, equipment, and in some cases the actual purchase orders and contracts that your firm receives and wishes to fulfill.
When we sit down with our customers and they ask us for information on asset based lending we find ourselves often explaining right out of the gate that asset based lending is not a ' lending of last resort '. Most of our customers are surprised to hear that some of the largest corporations in Canada and the U.S. finance their business through asset based lending.
The fact that you as a Canadian business owner can leverage not only your receivables for liquidity, but your inventory, contracts, and equipment and real estate naturally brings true liquidity to the table.
Many customers we work with immediately see asset based financing as a major competitive advantage, enabling them to improve relations with suppliers and grow sales with new or existing customers.
In some instances we have pointed out to clients that our best financing solution for a merger or acquisition scenario is an asset based lending arrangement as it maximizes the true asset and capital power of both firms.
In 2008 and 2009 Canada, like many other countries, or in fact all the world experienced a major liquidity crisis. As banks and independent finance companies pulled back on business line of credit, not always because they wanted to, but because they had to, asset based lending continue to offer more liquidity to customers who were working capital and cash flow challenged.
Naturally as many Canadian firms had balance sheet and income statement erosion, (I.E. financial losses) the challenge of what one could call ' traditional ' financing became even greater.
Many of our customers scrambled to get their balance sheets in order, as for the first time in May years loan covenants were in breach, etc.
We don't want to say that the banks and other large finance firms in Canada let Canadian business owners down, but certainly many times it felt like that, and the welcome comfort of an asset based lending arrangement saved the day for many a firm of all sizes .
Bottom line? Asset based lending has risen to the top of the pile with respect to a robust full financing options for Canadian firms looking for financing for a combo of one or all of receivables, inventory, equipment, real estate, and contracts .
Speak with a credible, experienced and trusted advisor in asset based lending to determine if it's your firms 'holy grail 'of Canadian financing!
' Canadian Business Financing With The Intelligent Use Of Experience '