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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Direct Line = 416 319 5769
Office = 905 829 2653
Email = email@example.com
Business loans, when it comes to a line of credit provide owners/financial managers with the challenge of financing working capital needs. While the majority of companies in the SME sector want to rely on Canadian chartered banks for these needs ' Asset Lending' has emerged as an alternate - and quite often easier to achieve. We're ' unboxing ‘ABL (asset based lending) for your consideration. Let's dig in.
The easiest way to think of an asset based credit line is to simply take a look at your balance sheet. The total assets you have in receivables, inventory and equipment are essentially you ' box' of assets that are margined under a new separate non bank line of credit facility. ( While banks also offer this type of lending more often than not it's for transactions in the 5-10 Million dollar range and up, obviously eliminating many firms in the SME sector who typically have revenues in that range, not assets!)
So while our banks focus on what they do best - addressing cash flow and risk and outside collateral and guarantees, the asset lending model looks to the main source of fluctuating repayment - your sales and your assets. (Sales create receivables) The majority of asset loans tend to reflect a higher amount of risk as companies in the SME sector ( Most define this as firms with under 25 Million $ in sales ) typically present a higher risk rating when it comes to overall credit quality .
While asset based lending solves problems of high growth and erratic profits and balance sheet structures it also can address problems such as financial distress. Notably it is also used in many situations in acquisition financing, as it allows you to monetize the assets of the target firm.
How does the asset lender offering these types of business lines of credit than manage the overall risk - allowing them at the same time to offer higher levels of financing than you typically could achieve from a bank? The answer - specialized knowledge of the true value of your assets as well as placing a higher value on more regular reporting of asset categories such as a/r, inventory , and equipment values .
Equipment becomes a component of your credit facility, and is almost always subject to an appraisal. Rarely will a bank lend against fixed assets as a part of your revolving credit line - the asset based lender will.
Successful business owners/mgr's will always be open to checking out newer forms of financing that might assist in growth and profits. If you're looking to ' unbox’ new types of business credit alternatives seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your needs.