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Business Success Is Hard –
OVERVIEW – Information on asset based lending in Canada. The right cash flow solutions for your firm might just come from these asset finance strategies
So is business financing via asset finance a difficult concept to understand? Hardly. Asset based financing, often called 'ABL' by those in the industry, is simply the method of obtaining the maximum working capital you need from your assets, which include typically receivables, inventory, and in many cases some equipment and/or real estate. That's as simple as it gets.
So how can monetizing your assets be the potentially ultimate working capital tool for your business?
Although it's been in existence for many years, in the past asset finance or asset based lending (we also call it a 'working capital facility ") is coming into vogue.
It doesn't take rocket science to understand when, given traditional financing almost totally collapsed in the 2008-2009 global meltdown, that companies began searching for options and alternatives to their business financing needs.
Lenders like asset based financing simply because they are using their expertise and knowledge in your assets to help you cash flow your business.
Although many companies turn to asset based lending when they can’t access traditional bank financing the reality is that this type of financing has some unique characteristics that allow you to utilize the financing for other reasons - Those include:
Major expansions
Buying another business
Bridge financing your business while you undergo a restructuring or turnaround.
In many cases it's ' buffer' financing allowing you to get back to more traditional ' bank type ' financing.
As we stated, it's very simple for us to explain to clients what an ABL facility is, it's a bit more complicated to get them to understand how it works. The best way to explain it though is to simplify it all and say that you should consider asset finance via a working capital facility as simply a ' revolving line of credit around all your business assets '. Can that be anymore simply to understand? We don't think so.
Typically the process is as follows - After the traditional ' application ' process there is an agreed upon value put on all your business assets - as we said , 99% of the time the assets under this financing include receivables, inventory, equipment, and in some cases real estate . The most common assets though are receivables and inventory.
Your firm provides regular monthly, and in some cases weekly updates on the values of these assets, and you in turn use your regular bank account to draw down on funds, as you need them, to run your business. Similar to a bank revolving line of credit facility your asset based financing facility fluctuates everyday as a dollar of capital flows through your business - you purchase product, you generate a receivable, you collect your receivable, and of course the process repeats itself.
If there is one simple advantage of asset based lending it's that the financing grows as you grow sales and assets! You can truly say you have access to unlimited financing, albeit often at a higher cost.
Other forms of asset based lending such as SR&ED Tax Credit Financing, Leasing, factoring receivables, and PO Finance are being routinely used by many of your competitors. Why not your firm?
Asset Finance strategies help you do that. 50% of Canadian businesses report that the inability of their sales growth to generate funds hinders their progress. Top experts such as Canada's BDC cite growing a business as the most common goal of the vast majority of firms.
Speak to a trusted, credible business financing advisor in this area to ensure you understand the options, and of course the benefits, of this unique and creative method of business financing.
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
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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