7 Park Avenue Financial – In the News
The Editorial team at CANADIAN EQUIPMENT FINANCE magazine recently asked us to comment on ASSET BASED LENDING in Canada . Here’s the article below from this excellent Industry/business magazine – CLICK HERE FOR LINK TO DIGITAL VERSION OF THE APRIL EDITION
The Growing Popularity of Asset Based Lending
By Stan Prokop, CEO, 7 Park Avenue Financial
From a general overview, asset backed lending (ABL) is both popular and
readily available across almost all industry sectors within the Canadian
marketplace. With its uptick in popularity over the last several years, ABL
has not only seen an increase in traditional asset backed lending, but most
Canadian chartered banks have embraced ABL finance in some form as well –
either through direct ownership of ABL entities or through partnerships.
The Current Trends
Asset backed lending is currently seeing some of the lowest borrowing rates
in years. The result of these low rates has been the placing of tremendous
pricing pressure on those deals that have higher credit quality.
When looking at sector trends, within retail there are many larger retailers
taking significant advantage of ABL inventory credit lines to finance
growth, expansion, and basic refinancing needs. Certainly ABL lenders that
place significant emphasis on the liquidation value of assets have made
major inroads on transactions. The healthcare sector is also a fast-growth
sector that is benefitting from asset backed lending.
Historically technology-based firms have not utilized ABL to any major
extent – typically because their assets are heavily focused on intellectual
property with lower emphasis on the staples of ABL borrowing such as
receivables and inventory. However, with the competitive nature within the
current lending environment, many asset based lenders are compelled to
consider alternate asset categories, such as purchase orders, contracts,
patents, and tax credits, as financeable assets.
Along with the widening of alternate asset categories, maximum deal sizes
continue to be almost unlimited in nature. However, many firms are lowering
the bar on minimum transaction size. While Tier 2 lenders will consider
$250,000 deals, Tier 1 lenders are more apt to consider transaction sizes
below $5 million. In the past this has not typically been the case. On
larger transactions it’s certainly not unusual to see inter-creditor
agreements between ABL lenders and other secured lenders.
Gains in Market Share
In recent years, ‘subsets’ of ABL have made huge gains in market share.
These include such sectors as factoring firms, working capital lenders,
purchase order/supply chain financiers, floor plan lenders, and merchant
cash advance firms. While considered a part of ABL lending, these firms are
generally smaller, more nimble, and niche oriented.
As well, although the venture capital market in Canada is currently
considered to be emerging from a very difficult period, many private equity
lenders are now considered real competition to true ABL lenders and are
providing both equity and liquidity to transactions.
Knowledge and Awareness
ABL is still significantly misunderstood and oft miscategorized. Many CFOs
and business owners still continue to view Canadian chartered banks as the
only primary financing solution. However, increasingly, business owners,
managers, and boards now recognize that asset backed lending solutions are
often the solution to refinancing troubled firms that face insurmountable
challenges from the traditional lending environment. And as a result, the
role of the intermediary is taking on ever-increasing importance as business
owners recognize that they don’t have the time and expertise to source ABL
financing solutions without the assistance of qualified, trusted, and
Despite some lack of awareness and knowledge among CFOs and business owners,
asset backed lending is nevertheless coming into its own in Canada. The
recent IPO from Callidus Capital suggests this to be the case – certainly
from a public acceptance point of view – and the oversubscription of that
public offering seems to suggest true interest and validation of this aspect
of Canadian business financing.
Stan Prokop of 7 Park Avenue Financial provides business financing for
Canadian firms. He specializes in working capital, cash flow, asset based
financing, equipment leasing, franchise finance, and Canadian tax credit
END OF ARTICLE
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :
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