Asset Based Lending In Canada : The New Business Financing Alternative For Cash Flow Survival

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 Ready To Get Excited About Business Financing Possibilities ?

Information on asset based lending in Canada.  'ABL' finance is the new business financing alternative for business credit line needs and cash flow / working capital survival . Here's your why and how!

  

Asset Based Lending in Canada  

  – what’s all the excitement about?  As we are well into our 2016 business year in Canada the financial markets continue to provide challenges to Canadian firms in the small to medium enterprise sector. We personally define small to Medium as say, Sales revenues fewer than 50 Million dollars, but you will find a number of people with different size definitions. Suffice to say our numbers are smaller than those in the U.S, as usual!

Working capital and cash flow financing challenges seem to be a constant source of challenge for the Canadian business owner and financial manager.  When we combine that challenge with the fact that many companies have  debt and debt service problems, and in many cases are coming off a ‘ bad year ( the worst year ever? ) you can see how any new financing solution very quickly becomes top of mind .

If the Canadian business owner is confident that his liquid and fixed assets as a whole can support the financing need careful thought should be given to an ABL arrangement. ABL is the term most people refer to when discussing Asset based lending if they have a financial background.

So what are those liquid and fixed assets – well they are of course the company’s liquid current assets, receivables and inventory. That is also balanced with the firms fixed assets and real estate might be included in that.

Whether on the U.S. or the Canadian side of the border the asset based lending lines of credit continue to increase – some of the largest corporations in Canada and the U.S. have either completed such financings, or are contemplating them.

As large as the market and market potential are in asset based financing it is interesting to note that  the actual market participants can really be brought down to a handful or two of key players . There are some large tier one type firms that are primarily offshoots of major U.S. corporations who dominate the market in asset based lending, and then there are a very small handful of Canadian well heel players. That is finally balance by a similar handful of Canadian tier 2 and tier three players who play in niche markets and geographies.

Asset based lending works only when there are... guess what... ‘Assets ‘! As such industries that are very capital intensive in nature – think manufacturing, etc... Are perfect candidates for ABL type arrangements?

There has been a major stigma in the asset based lending marketplace that this type of financing – i.e. leveraging your current and fixed assets to the max , is a form of alternative financing that was previously embraced by only firms who were in some sort of financial trouble or distress .

 While a firm can have financial losses, a poor balance sheet capital structure,  or cash flows that are very volatile or seasonal  and still be a great candidate for an asset based line of credit /loan , it should be pointed out that major successful well known corporations have added ABL  financing to their financing toolkit so to speak .

When CFO’s and business  owners meet with chartered banks to structure operating and term financings the  discussions revolve around balance sheet ratios, debt covenants, cash flow coverage, and personal collateral  .

 When all of those issues are generally positive in nature the Canadian chartered banks are providing line of credit and term facilities in the 5-6% range in early 2010.  When there are major challenges in satisfying bank requirements those ratios and loan covenants are not on the discussion table with your asset based lender, only the liquidation value of all your assets is.

 Receivables and inventory in most firms is of higher quality, and can be margined in the 90% range, while appraisals are performed on other fixed type assets. That gets your company maximum asset financing, and that is what ABL is all about. Is it more expensive than traditional bank financing – we would say 95% of the time it is.

 But as a business owner does you want no or a small credit facility at a great rate, or all the financing you need at a more expensive rate?  We hope you are now at least aware of the financing alternative – now its your turn to decide , talk to an expert in the area, and  investigate asset based lending as a fit for your Canadian company !




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 :   
http://www.7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.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.

Stan Prokop