Asset Based Financing Loans In Canada : How To Achieve The Right Mix Of Business Credit

Tweet

Quick Question : What Exactly Is Asset Based Financing In Canada ? We’re Glad You Asked !

OVERVIEW – Information on asset based financing in Canada . The ability to achieve the proper type and mix of business credit and loans is key to financial success for growth in profits and sales

Asset based financing is a unique part of the business finance landscape in Canada. So much so we sometimes get the question: What is it! More importantly business owners and financial mgrs want to know how they can utilize these types of loans for cash flow and working capital purposes with the goal of funding their business. Let's dig in.

The reality is that asset based lending means different things to different business folks. The truth is that it's a part of the non traditional method of financing a business in Canada that might be temporary or in some cases more permanently challenging.

Although the owner.mgr might think their need is somewhat unique the reality is that financing needs typically revolve around sales growth or key balance sheet issues that need a fix. We've never missed the true irony around how fast growing or even explosive sales can become a huge financial and operational challenge, as many have experienced.

Fixed assets are often a key part of an asset based financing solution. The equipment your company either requires, or has already can be in a broad range of asset categories. Owners/financial mgrs are looking to acquire new or used equipment, or refinance existing assets. That ' refinancing ' can often be part of a ' sale leaseback ' which is one of the key categories in asset based lending. That strategy allows owners to ' free up ' equity in assets and harness that equity via new cash flow and working capital.


How does that sale leaseback strategy work? It's quite simple. Although business owners in many cases have a strong sense of what some of those assets are worth quite frankly that is not what counts. It all comes down usually to an appraisal being done on the equipment, and when the appraisal comes back a loan is made against the appraised value. Usually business owners can expect to receive a fairly high percentage of the liquidation value of the equipment, but this amount tends to be less than the fair market value of the asset .It is very important to understand that the asset has to be free and clear of any liens or charges. In cases where a small amount might be owing to another lender that amount can be paid out and bundled into the new loan transaction.

A key point in equipment refinancing is that the commercial lender will place a combination of emphasis on both the asset value as well as your firm’s ability to prove cash flow for repayment.

There is a huge difference in how an asset based lender looks at your asset and advances funds against it, versus a Canadian chartered bank.

There is technically no limit as to the amount that can be advanced against equipment, although most transaction we see in the marketplace is certainly less than 5M dollars.

In summary, asset based financing means different things to different people. One of the key context areas of this type of financing is equipment financing - yet numerous other key categories in asset based lending play a key part of solutions your firm might require and have access to .

They include:

A/R Financing solutions: Factoring, Confidential Receivable Finance

Inventory Loans

Tax Credit Financing (Primarily SR&ED)

Cash flow loans

Equipment Leasing

Royalty Financing

Bridge Loans


Whether your firm is growing quickly, has restructuring issues, or other unique situations you will benefit from seeking out and speaking to a trusted, credible and experienced Canadian business financing advisor with a track record of success.



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