OVERVIEW – Information on the asset based line of credit financing solution in Canada. Access to business credit and cash flow solutions is key to long term growth and survival
Business credit and cash flow solution challenges abound in Canada. That challenge requires that you ‘ get on board ‘; the alternative is of course falling off the track … i…e business failure . One commonly used and relatively newer for of company financing is the asset based line of Credit. We think you need to know about it… so… let’s dig in.
Let’s review exactly what this type of business financing is, why is it different from what you may have come to expect, and what are the benefits for your business when you consider this type of financing.
We can even sum it up in one word. That word? ‘Assets’ – if you have them, you qualify, if you don’t have them, well, let’s not go there…
Just to clear the air, an asset based line of credit loan in fact is not a ‘ loan’ per se, that’s where we spend a lot of time talking to clients about what this type of financing really is – because they view it as borrowing, or adding debt to the balance sheet. Bottom line – this isn’t a loan per se.
In reality the asset based financing we are talking about is simply a revolving line of credit that is tied very specifically to the value of your assets – the most common asset categories under this line of credit are inventory and receivables. The other assets that can be thrown into the mix are unencumbered equipment, tax credits, real estate, etc.
At the risk of over repeating, we are not talking about loans, we are talking mainly about borrowing on a daily basis, as you need it, and using these assets as collateral .
We have seen with our clients countless examples of how this type of Canadian business financing has increased a company’s borrowing ability by 100-200% or more.
How can that possibly be, asks the client? It is simply because the borrowing you are used to, if you have been able to achieve it, is based on ratios and covenants and credit limits, and your ability to achieve forecasts for institutions such as the Chartered banks. When you aren’t able to achieve that we will call traditional cash flow financing in Canada via a business line of credit the asset based facility is a solid solution.
Clients invariably ask ‘ How do we get approved – do we qualify?’ – We have already talked about your qualifications and the ability to answer this question. Got assets? You’re approved!
That’s a simplistic answer, so let’s explain in more detail. Typically in Canada these types of financings work best for facilities in the 250k+ range. There is no real maximum on the amount you can monetize/borrow. Facilities smaller than that tend to be receivable based financings only. In general the asset based lender prefers a higher ratio of receivables to inventory, but that is not always the case, depending on your industry and your asset categories.
Most Canadian business owners and financial mangers know the general cost of bank financing – asset based financing is more expensive, but offers you unlimited liquidity without the shackles of ratios, covenants, outside collateral, emphasis on personal guarantees.
By the way, many of the largest corporations in Canada use this type of financing, but it also covers what we call ‘ story credits ‘. These are cases where your firm is in a turnaround, perhaps it has new contracts, perhaps you are coming off a less than satisfactory year, etc. There are a multitude of reasons for choosing this type of financing.
So if cash flow finance is your challenge and you think the asset based line of credit is your solution then seek out and speak to a trusted, credible and experience Canadian business financing advisor who can demonstrate to you the benefits of this innovative form of a new breed of cash flow finance for your ongoing growth needs.
Stan Prokop – founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years – Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
7 Park Avenue FinancialSouth Sheridan Executive Centre
2910 South Sheridan Way
Direct Line = 905 302 4171
Office = 905 829 2653
Email = email@example.com
‘ Canadian Business Financing with the intelligent use of experience ‘
ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
7 Park Avenue Financial
Canadian Business Financing