Upgrade from an 8 Track Mindset to IPOD Via Changing Times In Canadian Business!
When it comes to business financing in Canada what would you do if you could take one of your finance alternatives and take it from the days of 8 track players into the world of iPods and all the other technology we have access today. Talk about a change in speed and features and ease of doing business, not to mention more for your buck!
AN ASSET BASED CREDIT LINE IS THE NON BANK ALTERNATIVE FOR A LINE OF CREDIT
That's the analogy we're using today for the Asset based credit line, which is a non-bank business finance alternative that provides your company with cash flow and working capital in a manner similar to a Chartered bank business line of credit. But there are significant differences in how these asset based lending lines of credit facilities are obtained and how they work. Let's examine some of those key differences as they affect account receivable, inventory and fixed asset borrowing.
Asset based lenders can also include real estate assets into the borrowing mix, providing even more liquidity.
CREDIT LINES FACILITIES ' REVOLVE'
When we compare how facilities such as this operate it's all about ' revolving ‘. The analogy to your personal lines of credit in your own life isn’t far off here. So if the bank facility and the ABL (asset-based lending credit line ) fluctuate in the same manner, what’s the difference our clients can be forgiven for asking?
HOW ASSET BASED CREDIT LINES ARE MARGINED FOR BORROWING PURPOSES
One of those key differences simply boils down to the availability of funds, because you are in effect borrowing against the whole asset base of your company. To be clearer, most bank facilities focus on conservative margins of 75% of accounts receivable and an even more conservative margining of your inventory. The asset-based business facility typically lends at 90% of your receivable, and anywhere from 25-60% of the inventory and other assets such as equipment. Margining assets for more borrowing power is what asset based loans are about.
Borrowing approval is typically recalculated every month via what asset based lenders call a borrowing certificate.
THE DIFFERENCE IN BANK CREDIT FACILITIES AND THE ' ABL '
How then does the asset based lending lender take comfort in offering your firm so much more liquidity? They do that by utilizing two techniques that are typically ignored by the Canadian chartered bank credit facility. Those two asset based loan techniques are :
Due diligence on the valuation of assets
More extensive monthly reporting requirement
But those two techniques deliver because we have often seen clients go anywhere from 50-100% in total additional borrowing power. Talk about a potential liquidity explosion in your firm.
So why isn't every business borrower in Canada utilizing asset based financing? We wonder about that one a lot also! but the reality is that this method of revolving business credit is, on balance relatively new in Canada, having come to us from our good friends in the U.S. . Some estimates in the U.S. place asset-based lending at 30-40% of all borrowing activity if you can believe that.
4 TYPES OF BUSINESSES THAT UTILIZED ASSET BASED CREDIT LINES
Is the Asset Based Credit Line for your firm? It certainly covers all categories, including firms who are in the following phases of their existence:
Start up's
Fast Growth
Special Situations
Firms currently in Special Loans
Companies with solid credit but who are unable to access the full amount of financing they need from our Chartered banks can finance the balance sheet with asset loans.
CONCLUSION
Whether you are a small business or a larger corporation seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you determine the benefits of the asset based financing ABL credit facility as they relate to your firm's cash flow needs. Let this facility, as in our analogy; take you from 8 Track to IPOD...quickly. Asset based lending works!
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Click Here For 7 PARK AVENUE FINANCIAL website !
7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.
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. He is an experienced
business financing consultant
.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 financing 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.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2020
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