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Stop Me If You’ve Heard This But Isn't Business Credit Still Challenging and Why All The Excitement About Asset Based Financing ?
OVERVIEW – Information on business credit solutions in Canada. Finance strategies such as asset based financing and other alternatives can provide all the capital you need to run and grow your business
Business credit and financing alternatives are dramatically different in Canada when compared to the U.S. . Why is that? One reason is that asset based finance alternatives abound south of the border. So stop us if you’ve in fact heard this, but the good news is that the trend is reversing and new transactions are being completed everyday in this asset financing category. Let's dig in.
Canadian businesses who need financing in excess of 250k (the upper limit is almost unlimited) can benefit from this relatively new Canadian financing strategy.
Clients we talk to always have questions as to what the financing actually is and, more importantly, how it works and does their firm qualify.
It is always surprising to us that asset based lending is still probably less than 5% of Canadian business credit while in the U.S. it accounts for hundreds of billions of dollars of ongoing business financing.
ABL, the acronym for asset based financed is simply loans secured by collateral (assets). In the case of a line of credit, it's secured by inventory, accounts receivable and/or other balance-sheet assets. Typically these loans are ' non bank ' in nature. You may not have heard that the banks actually have small divisions within the bank that also focus on asset based lending!
Lets address the qualification issue first - the reality is that if your firm has business assets in receivables , inventory, equipment , and even real estate those assets can be monetized into a business line of credit that focuses on the asset - Bottom line ? Less emphasis is placed on the overall quality or condition of your balance sheet and income statement. You got it - it's all about ... the assets!
No secret those Canadian chartered bank lines of credit provide a similar and more often than not less expensive form of financing via revolving lines of credit. Banks offer this type of financing outside their normal business banking, but qualifications and deal size are still somewhat challenging to meet in our opinion
When it comes to the banks most business owners know those facility offerings focus on balance sheet and income statement strength, ratios that must be met, and heavy emphasis on personal covenants and outside collateral. That's the key difference!
When you negotiate an A B L facility you and the lender agree up front on the market value of your ongoing receivables, inventory, and unencumbered equipment. That collateral becomes the essence of your financing and drawdown capability.
So why is this all different from a bank? The answer is simply - banks have regulated formulaic methods of financing business - in fact many would agree that bank business credit got increasingly difficult to get since the 2008 worldwide debacle. No question things are getting better though with financial markets and business credit becoming a lot more accessible.
So about these ABL players. Finance firms offering asset based lending are not regulated in the same manner, do business in almost every industry in Canada, even those that are deemed ' out of favor 'and the management of these firms typically have years of experience in lending against receivables, inventory (yes, inventory!), with the additional enhancement of allowing you to monetize your credit facility by including some borrowing against your equipment for ongoing working capital and cash flow.
Seek out and speak to a trusted, credible and experienced business financing advisor in this specialized area and find out how a new financing facility can put you head and shoulders above your competition in overall financing strategy.
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 13 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
Office = 905 829 2653
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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