Asset Based Lines of Credit – Canadian Financing Solutions

Asset based lines of credit are an alternative to Canadian chartered bank financing in Canada. It is certainly well documented that Canadian business, small, medium, and even large has experienced general credit tightening by our chartered banks here in Canada. Business owners and financial managers are forced to consider alternative financing solutions which are certainly not numerous in natures here in Canada.

Asset based lines of credit are absolutely one solution to the financing you might be searching for. Surprisingly many of our clients have not even heard of this type of financing, much less understand it.

Many customers are actually forced to consider an asset based lending solution because of the concern of owners, lenders, and suppliers that their business does not have the ability to finance the firm properly. When suppliers and other lenders act aggressively on the belief that your firm can’t meet its obligations problems ensue!

One key point we continually make with clients, and we would recommend this to everyone is that you should be aware of your financing alternative before you are forced to be aware of them. Simply speaking, it behooves you to learn about asset based lines of credit. Although the ‘ABL ‘ ( short form ) financing facility has been around for years some people still associate it with distressed lending – it is not just that . It also is not borrowing or taking on additional debt, which is certainly a relief to owners.

So what is it then? It is just the financing of all your current (and sometimes fixed) assets as total collateral for borrowing. In fairness most of that financing is done on receivables and inventory

Because you are in effect borrowing more than you ever could have in a traditional financing arrangement there is some additional reporting requirements when you borrow under an asset based line of credit. But frankly when we talk to customers they indicate this additional reporting often helps them to understand their business better.

It is interesting to note that many firms utilize this type of financing for a long period, and view it as an excellent source of financing, while some business owners and financial mangers view it as a bridge to solve temporary working capital and financial statement challenges. Generally firms considering asset based lines of credit cant meet some of the ratios required for traditional banking and debt service, yet at the same time they have new contracts, need new assets, or more headcount , etc – with asset based financing being a solid solution to provide this additional capital .

In summary, asset based lines of credit are a business financing option. They are utilized in Canada by hundreds, even thousands of medium sized and larger firms. They are a form of non traditional lending that in reality is become mainstream. Asset based lines of credit provide the maximum working capital against your operating assets such as receivables, inventory and equipment...

Speak to a business financing advisor who has credibility, experience in this aspect of Canadian business financing. You can then determine that if it’s the right solution for your Canadian business.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/asset_based_lines_of_credit_canadian_financing.html