OVERVIEW – Information on asset backed lending in Canada . This newer form of Canadian business financing has solved cash flow challenges for thousands of firms in Canada
Asset Backed Lending is often the answer to our clients main desire in Canadian business financing. That desire? Something that works! Who doesn’t want that?
The new business financing reality is that asset backed lending, aka ‘ABL’, might be your new choice for company finance needs.
Asset based line of credit facilities are becoming more popular every day. Why? It’s simply a newer method of lending to Canadian business with a total focus on assets. ‘Assets’. That’s the key word. Let’s dig in!
So which assets are they ask our clients? Typically these include inventory, receivables machinery and equipment in your fixed assets part of the balance sheet, and in some cases real estate. In some very unique cases IP, or intellectual property, a la patents, etc can be financed.
Another new common category is tax credits, such as SR ED (SR&ED) tax credits. Tax credits are in effect receivables, money owing to you from the government that is in the form of a non repayable type grant. So monetizing that asset as soon as you can allows you to employ cash more efficiently in your business. So don’t discount your ability to finance that asset, i.e. your R&D capital refund. It beats waiting and accelerates cash flow.
Clients typically imagine inventory and receivables as being the only items they could margin for liquidity with their bank. The reality is that even inventory financing is becoming more difficult in the chartered bank environment, certainly for start up, smaller, and medium sized firms. That therefore is the main difference in an asset backed lending and working capital facility; in its simplest form it’s simply the margining of all those other assets to capture maximum liquidity. Repeat – All your assets!
So who is actually using these types of cash flow facilities, and why are they a very solid alternative to what is termed ‘ traditional’ bank financing. (We’re not so sure these days that ‘ traditional’ bank financing is as available as it used to be – what do you think?!)
The truth is that this type of Canadian business financing is an alternative to bank financing, its real, its available, and allows you to not having to consider more unpalatable options such as raising new equity and diluting your ownership.
We are all for secured bank lending… if you firm can qualify for all the lending it needs. But if you have had financial challenges then consider asset backed lending as a solid option. What are some of those ‘ challenges’ we speak of that might not allow you get Canadian chartered bank financing… its issues such as a temporary loss, a turnaround, new ownership, balance sheet ratios and covenants that might not work for the bank, etc .
Asset based finance doesn’t focus on those issues – yes they are discussed, but it always comes back to ‘ the assets ‘ – and if you have them you can margin them on a daily basis for working capital and cash flow .
What’s the catch? While we feel the advantages of asset based lines of credit far outweigh the alternatives, the reality is that 95% of the time this type of financing is more expensive. It also requires more reporting on an ongoing basis, although most business owners we talk to will gladly pay more finance charges and are ok with reporting if they in fact have all the cash flow they need to grow and profit in today’s competitive environment. You can also expect a bit more due diligence on your overall asset quality when you set up the facility.
Bottom line? An asset backed line of credit facility is a new and emerging working capital financing that provides your firm with all the liquidity to grow.
Speak to a credible, experienced and trusted Canadian business financing advisor to determine if this type of working capital and credit facility benefits your firm.
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 Financial
South Sheridan Executive Centre
2910 South Sheridan Way
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