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The Optimists Guide To Business Financing In Canada
OVERVIEW – Information on business financing in Canada. Adopt a positive outlook to loans and funding needs via these asset finance strategies
The reality is that certain business finance strategies and tools work better than others based on your firms particular needs. ABL, the acronym for ' Asset Based Lending' might well be the main ' secret weapon' you've been search for in cash flow independence.
.What if you have a financing mechanism that was a non bank type financing that covered all every size of business, all industries in Canada, and did not place a major emphasis on your balance sheet, income statement, profits or lack thereof! And was, relatively speaking easy to arrange.
We can hear you lining up as we speak! Let's talk a bit about what this financing is, how it works, and cover off some key questions that clients have about costs, day to day paper flow and reporting, and the key advantages.
No business finance strategy is without some form of ' downside ' so we'll explore that also in case there are concerns that need to be addressed.
ABL, or asset based lending allows you to borrow, on a regular, ongoing basis, against; you guessed it, ' assets '! Your assets in any business are always going to be the same and they can be categorized into a few key categories which include receivables, inventory, equipment, and, in some cases real estate.
When you are in a traditional Canadian chartered banking relationship your lender lends against those same assets, but probably not to the extent that a true asset based line of credit would provide you with. And the pre requisites for that banking facility are all too clear for Canadian business owners and financial managers.
To achieve traditional Canadian chartered bank financing you must be profitable, have a solid balance sheet, and have a decent measure of personal guarantees and outside collateral.
That's now what ABL is about, it's about only your business assets, and monetizing them in a fashion that makes them as liquid as you need them to be.
A typical asset based revolving line of credit would margin all your receivables, a significant extent of your inventory, and include drawdown ability on unencumbered equipment and real estate if they in fact were available and required. You therefore only have to remember one thing in ABL lending, ' assets ‘. Business assets mean access to funding!
Clients always want to know if and how they qualify for such a facility. You must be in a position to provide some decent reporting around the aging of your receivables, the turnover of your inventory, and the market value of your equipment.
We would respectfully suggest if you can't do that you might not even be a candidate for staying in business, so those certainly aren't onerous requirements!
So who is eligible for asset based financing? Businesses that are the best candidate for this type of financing are those with high growth patterns, or firms which are coming out of a challenging period in their history. A frequent misunderstanding around this type of financing is that it is ' debt '. That is not the case. ABL strategies simply monetize assets - They accelerate borrowing capability based on turnover and value of assets.
Oh, those ' disadvantages ' and risks we spoke about? The two disadvantages, or potential concerns are the higher cost of this financing, as well as the additional reporting we spoke about.
Other frequently used asset financing strategies that should be considered include:
Factoring/ AR Financing
Sale Leasebacks
SR&ED Tax Credit Bridge Loans
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding needs.
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
7 Park Avenue Financial
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
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.
Stan Prokop
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