Asset Based Loans and Cash Flow Factoring and Financing Alternatives in Canada

Asset based loans come in a variety of alternatives within the Canadian business financing market. On top of the account receivable you generate from sales and sales growth Canadian business also has investment directly related to inventory, equipment, and on occasion real estate.

The challenge is simply to monetize those critical current and fixed assets into cash flow when you need it, in a manner that makes sense for your firm. The most obvious way to generate cash flow and working capital from your business is to directly monetize accounts receivable via a cash flow factoring facility.

Naturally this can be also accomplish with a chartered bank operating facility, but if this is not feasible your ability to monetize receivables when you need to is best done via a factoring or invoice discounting facility .

When we sit down with clients and talk about the sometimes higher cost of non bank asset based financing in Canada one of the things we focus on is the cost of equity. Although asset based financing in its many derivatives ( bridge loans, factoring, financing against equipment equity, inventory advances, etc) may be a more costly method of financing your business we can categorically say, and the text books will back us upon this one, that equity financing is much more expensive.

A business either borrows funds, or injects owner equity into the business, and equity capital can be expensive when considering its dilutive nature relative to total ownership. And the reality is that the right amount of debt is in fact a great way to optimize leverage and increase return on investment and return on equity - a great way to measure owner and manager performance .

The key benefit of asset based lending is its ability to generate cash flow for you when you need it. Cash flow and working capital needs ebb and flow daily, weekly, monthly, annually, seasonally... you name it, it is always changing. When you send invoices, build up inventory, or pay suppliers, that is all part of the cash flow conversion cycle in any business.

Your ability to focus in on assets that can generate cash when you need it is a true working capital success scenario. The best thing you can do in preparing to consider a true asset based loan or asset based lending facility is to ensure you can properly demonstrate the ongoing sources and uses of your funds, and in particular the turnover of those funds . The ability to clearly understand your days sales outstanding, annual inventory turns will significantly impact your ability to source and obtain the right asset based loan facility.

The most obvious facility we mentioned is factoring or invoice discounting – for the purposes of information we are sharing now on this subject the best advice we can provide is very simply – choose the right factoring partner and firm – which is best done via the seeking out of a trusted, credible and experienced asset based lender in Canadian business financing .

The key benefits you will derive from a properly constructed cash flow factoring facility are the amount of capital you can immediately borrow against receivables, plus the knowledge your limit will grow easily as you increase sales revenue. In many other forms of business financing receivable advances are limited to formulas and tied to financing performance of your company – that is not the cash with cash flow factoring.

Investigate the benefits of asset based loans, which may come in a format that works for your business financing success.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/asset_based_loans_cash_flow_factoring.html