YOUR COMPANY IS LOOKING FOR DEBT CAPITAL AND
ASSET BASED FINANCING CHOICES!
Asset Based Lending Solutions
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
When corporate partners and venture capital aren't available or don't make sense the Canadian business owner/manager turns to debt capital and asset-based financing choices for working capital and asset monetization. Wouldn’t it be great to have some solid choices in that area? The reality is that you do but just might not know it. Let's explain some key things around asset based lending.
We suppose we can make the case that when it comes to asset based loans debt is lower risk than equity, plus we always know what’s going on vis a vis payments of principal and interest. The potential danger is that by virtue of your covenants and the collateralization of assets they may be claimed by your lender who is primarily interested in protecting their capital.
We sometimes think that the above scenario is how the business owner/manager believes the lender wants to behave. That certainly is not so, as what lender would really want to be repaid from the normal operations and cash flows from your business.
THE ASSET BASED LOAN IS COLLATERAL LENDING OF SALES AND ASSETS
The actual ' assets' of your business are what normally drives most of the business financing in Canada. Because these assets have specific values balance sheet accounts such as buildings, inventory, and receivables are in fact the collateral behind your borrowing when it comes to ' asset based lending '. No mystery there. It's a classic example of balance sheet finance.
The alternative to hard asset collateral is the cash flow monetization of assets. And, oh yes, you can actually borrow against future cash flows, sometimes even on an unsecured basis if you can prove that historical and future cash flows are real and reasonable and carry a normal element of risk.
CAN YOUR COMPANY MEET THE TWO KEY CRITERIA IN CASH FLOW LENDING
How does the lender in Canada measure the risk of cash flow and debt repayment? This is primarily done via two rules of thumb
The cash flow formula is known as EBITDA
The ratio of total debt to your total shareholder equity
These ratios and calculations are then typically embedded into a loan document that makes them, in essence, a condition of the loan. The bottom line, a healthier business with good cash flow and low or reasonable debt has a great chance of achieving more debt capital. If EBITDA and debt/equity are ' out of whack ' then it's safe to say that challenges in obtaining debt capital and asset financing will ensue!
CONSIDER SHORT TERM FINANCING OPTIONS VERUS LONG TERM SOLUTIONS
When accessing both debt capital and asset financing it's important to determine what category or timeframe you are looking to address. By that, we mean short term financing of one year or less, typically business credit line solutions, or long term financing that typically might be 3-5 years, and finally an ongoing line of credit financing for your daily ongoing operations. The asset based lender establishes an ongoing borrowing base certificate on which you can draw down against accounts receivable and inventory.
BANKS VERSUS ASSET BASED LENDERS AND NON BANK COMMERCIAL FINANCE COMPANIES
While debt capital in Canada primarily comes from banks, insurance companies and pension funds for medium-sized to larger corporations there are numerous independent commercial finance companies and asset-based lenders that address the start-up and SME sector in Canada. It' all about knowing who to turn to and when. The key point to remember? It's a simple one. Assets can be financed!
CONCLUSION
The bottom line today. Pretty simple - simply that asset financing and cash flow financing for debt capital is available through collateralizing your receivables, inventory, equipment, real estate, etc. The trick is knowing who, what, when, and where! Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in your debt capital and asset finance needs and choices.
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Stan Prokop
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