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Removing Scarcity In Canadian Business Financing
OVERVIEW – Information on different types of asset loans and accounts receivable financing in Canada . Which type of business funding works best for your firm?
Asset loans and accounts receivable financing are often sought after innovative financing solutions you probably have been hearing about. They are ' subsets ' of asset based lending in Canada, and are helping thousands of firms achieve that ' cash flow positive ' feeling. Let's dig in.
Despite its new found popularity it's been safe to say that alternative financing is still just finding its feet in Canadian business - growing in traction and popularity every day. We're going to clarify some of the myths around this type of funding for your company as well as focusing on key benefits.
One of the main differences of an asset loan is that typically it is financed through a non bank arrangement. You should seek this type of loan if you are unable to generate sufficient working capital to finance your business in a traditional Chartered bank environment in Canada. While Canadian banks by far provide the lowest cost and often most flexible form of capital for your business it's unfortunately not available to all those who apply!
Asset loans that encompass ' operating facilities ‘are structured, around the various asset categories of your business - the two main asset categories are:
Accounts receivable
Inventory
As well fixed assets / equipment balance sheet assets can also qualify for asset based credit lines in conjunction with A/R and inventories.
Leveraging fixed assets/equipt/real estate your company owns simply enhances your overall borrowing power. It's the true underlying current value of your A/R, inventory and equipment that provides you with true borrowing power - much less reliance is placed on balance sheet ratios, loan covenants, outside collateral, etc., those latter three items being the key part of any bank type facility, and is clearly focused on your historical and present cash flow generation.
The irony is , of course that historical cash flow ratios do not work for many companies who are experiencing temporary challenges and who require ' bulges' in working capital to fund their growth and operations.
Asset loans, and asset based lines of credit focus on the collateral. Many clients we deal with have the collateral in A/R, inventory, purchase orders and new contracts, equipment, etc but can’t satisfy traditional cash flow lending requirements. They then are the true prime candidates for an asset loan, an asset based line of credit, or at its simplest and most basic form, a receivable financing that fully margins their accounts receivable with no set limit on future growth.
So now we understand what the facility is. How does it work on a day to day basis you might ask? The answer is simply that it’s a facility that goes up and down, frankly every day, with your borrowing needs. As your receivables and inventory fluctuate you draw down against their current value. This optimizes the amount of cash flow and working capital available for sales growth and profit generation.
The security mechanisms around these facilities are very similar to any type of bank financing. Additionally approval is often much faster as a simple first charge lien is placed on the assets being financed.
Advances rates on accounts receivable and inventory are established and as cash is advanced and then repaid by your customers the cash is turned over to pay down your revolving balance. It’s as simple as that. The true beauty of the facility is that as you grow your facility grows with you.
These working capital facilities, predominately A/R an inventory based are becoming more traditional in nature ever day. If you're a business owner or financial mgr looking to eliminate the term ' scarcity ' in your business financing and growth needs seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can get your firm back on the road to cash flow perfection .
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
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
' Canadian Business Financing with the intelligent use of experience '
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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