The Secret Difference in Business Funding
Information on asset based lines of credit as an alternative to debt financing for Canadian business. This cash flow and working capital solution is becoming widely popular- Here's why!
Clients always ask us the same thing, is this a form of debt financing, and exactly what is the difference between this and a Canadian chartered bank facility . Let’s examine those questions more closely.
In general asset based finance is a broad term which in fact could refer to a number of things, We have the same problem with other terms such as working capital and cash flow, they seem to be 'catch all 'phrases for a number of types of business financing, and to make things more complicated they infer different things to different people.
So let’s be clear, using asset based lines of credit jargon we are talking about a business line of credit that a Canadian chartered bank offers, and comparing it to the new kid in town, as asset based line of credit via an independent commercial finance company.
When you firm originates an asset based credit facility you are in effect using the liquidity in your current assets ( typically those are receivables and inventory ) and in some cases pulling some liquidity out of fixed assets such as equipment and real estate . Yes, you can access cash flow on a revolving basis out of your equipment and land if in fact they are unencumbered.
We still probably have most business owners confused a bit, because they are asking themselves right now that this seems exactly what my bank does (or that you would like them to do).
So here’s the difference, asset based lenders are high specialized, they, unlike many bankers who are generalists are high focused on the actual true underlying value of your assets on an ongoing basis. By ongoing we mean daily, weekly, monthly, not long term. In the old days ( and boy do we wish the old days were here in business financing ) you met with your banker quarterly or yearly, reviewed your financials , re set the credit line, and off you went to grow, prosper and succeed.
However business banking has changed in Canada and it has become more challenging to access the cash flow and working capital you need on a daily basis. Banks are regulated by provincial and federal governments around their capital bases, what they can lend on, and are subject to concentration issues. By that we mean that a bank could not choose to lend all its capital to one industry such as autos, etc.
So the key differentiator in asset based lines of credit is simply that you are working with a company that is most often not regulated, and is staffed by specialist who has a strong handle on your asset base. That's where the good news kicks in, because you can access sometimes up to 50 -100% more in revolving credit facilities because the advances against receivables, inventory (yes inventory!) and other assets are maximized to the hilt. In essence you are working with an asset based finance lender that can provide you with maximum cash flow and work with you to give you strong insights into asset turnover and help you through special situations. And remember, this is not debt financing via term loans or additional debt on your balance sheet, you are simply monetizing your liquid assets to the maximum .
So there’s the main difference , and if this type of financing for your business seems to make sense speak to a trusted , credible and experienced business financing advisor to guide you through the next evolution in Canadian business financing .
South Sheridan Executive Centre
2910 South Sheridan Way
Office = 905 829 2653
Click here for 7 PARK AVENUE FINANCIAL
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
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.