OVERVIEW – Information on asset based financing solutions in Canada. Completing Your Search for the right business loan and cash flow solution.
Asset based financing is one of the newer terms business owners and financial mgrs keep hearing about these days. Growth in this area has been driven by the tightening up of banks and traditional lenders in the SME COMMERCIAL FINANCE sector when it comes to commercial business financing needs for the right business loan and cash flow requirement.
When times get tough it’s critical for owners/mgrs to look at all the alternatives available to their business as it relates to funding needs.
When times get tougher businesses of all size look to alternatives in their overall financing strategy. The acronym for this form of finance is known by industry insiders as ‘ ABL ‘.
So who exactly provides this financing? Typically it’s non bank commercial finance companies who are independent and unregulated relative to banks and insurance companies – who no doubt find themselves extremely regulated – given they don’t take deposits and can take on more risk . Firms in the industry are a combo of Canadian, U.S. and even international.
The challenge? Sourcing the right type of facility that meets your needs and ensuring you’ve got the right advice and expertise to take on those funding decisions.
The most fundamental definition of asset based financing in the context of our information here is simply the provision of working capital and cash flow for your receivables, inventories, and in many cases equipment and real estate if that is applicable.
The ability to successfully finance A/R and inventory and equipment makes or breaks a business when it comes to financial success. Doing that properly avoids ‘ cash flow problems’ – both short term and long term.
As a result, financing sales via Receivables and inventory finance tends to dominate the majority of this type of financing. Many firms have problems with ‘ growth finance ‘- and most business folks quickly learn that sales and paper profits don’t pay bills!
Asset based lines of credit generally is available to all medium and larger size companies in Canada – generally start ups and very small firms simply don’t have the bench strength in assets to warrant this type of financing .
Asset based lending is simply maximizing the true value of your assets without the same focus that a bank might place on your overall financial statement quality. The facility generally has a limit, similar to a bank, but the reality is that as your assets grow your ABL facility will grow also?
When clients ask what it takes to qualify for such a facility we simply advise that your business must overall be viable, and quite often ABL facilities can be uniquely structured to your specific industry and business model.
The benefits of asset based credit facilities are very significant – they include:
Improved cash flow and greater working capital
Shorter approval times to get the facility set up
Reporting is more stringent in asset based lending because it focuses on the assets, but many clients tell us this additional reporting helps them understand their business better.
Higher financing costs in asset based lending bring a higher cost of borrowing, but a huge portion of these additional financing costs can be offset by better purchasing , taking advantage of supplier payment discounts, etc – In some unique cases we have seen the entire cost of an asset based financing facility being nicely absorbed by those two scenarios alone!
There are numerous ‘ subsets’ of asset based financing that can quickly fix any cash flow or sales finance challenge. They include:
A/R Financing/Factoring/Confidential Receivable Finance
Permanent cash term loans
Merchant advances/Short Term Working Capital Loans
SR&ED bridge loans
Royalty based financing
In summary, clearly the overall benefit of an asset based financing or lending facility is simply access to greater cash flow and working capital. It is an alternative form of financing that quite frankly is developing into a traditional method of financing in Canada.
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 10 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 = 416 319 5769
Office = 905 829 2653
Email = firstname.lastname@example.org
‘ 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