Asset Finance: A Smart Way to Secure Your Business's Credit Line and Working Capital

 

YOUR COMPANY IS LOOKING FOR WORKING CAPITAL FINANCING SOLUTIONS!

Maximizing Your Cash Flow: How Asset Based Financing  Can Help Fund Your Business's Credit Line

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing businesses today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CONTACT:

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

 

  

Building Your Business's Future with Asset Finance for Working Capital  

 

Business line of credit needs are often best solved when your firm understands why you need this type of financing/working capital facility. And the good news? 

 

 

What You Need to Know About a Business Line of Credit Via An Asset Finance Strategy 

 

Using asset finance as a business line of credit strategy provides companies with a flexible financing solution to borrow funds as needed for day-to-day short-term expenses. It allows the company to explore growth options. As a working capital strategy, asset-based lending provides the same revolving credit lines based on a higher loan-to-value ratio for borrowing based on asset finance eligibility.

 

 

 

ASSET BASED LENDING IS YOUR ' HACK ' FOR IMPROVING CASH FLOW 

 

Cash flow management is a critical requirement for any business, large or small. By focusing on effective asset turnover and proper management of accounts receivable and inventories, all companies' short-term cash flow gaps experience by all companies can be met by focusing on an ' ABL ' solution.

 

  

  

ASSET FINANCE EXPLAINED  

 

Asset finance is a method of financing a business that uses business assets of the company such as receivables, inventory, and fixed assets as collateral for borrowing. Companies obtain working capital via collateralized loans as a flexible financing option.

 

As a business owner, you don't need one of those ' Artificial Intelligence Bots ' ( such as Chatgpt )  to run thousands of algorithms around your cash flow needs.

 

It's all about understanding how your company is doing and what type of solution is available!

 

Cash flow is vital to all businesses. 60% of business owners say they regularly struggle with cash flow and 40% say the absence of access to cash flow financing restricts their business growth.

 

 WHAT IS THE DIFFERENCE BETWEEN A TERM LOAN VERUS A LINE OF CREDIT? 

 

Both term loans and lines of credit are types of typical business financing - Term loans are lump sum cash flows requiring regular installment payments over a fixed amortization period at a specified interest rate from the lender.

Business lines of credit are revolving credit facilities that businesses use to access funds as required based on a predetermined credit limit.  The line of credit options typically offers more flexibility as it revolves and is used only as needed.

 

WHAT ARE THE CAUSES OF CASH FLOW PROBLEMS

 

Common causes of poor cash flow problems are:

Collections too slow - accounts receivable management and financing of a/r is critical around unpaid invoices

 

The operation capacity (or ability) you have available for your company might be unreliable due to a lack of sales and the ability to meet current liabilities -  Take the time to research various Canadian business financing options with a focus on the nature of your industries and the actual need for working capital - that might be for equipment, real estate, inventory, etc.

 

 

 

SHORT / MEDIUM / LONG TERM FINANCING - WHICH ONE DOES YOUR COMPANY NEE D

 

Small business owners often struggle to find the right financing for their companies. They face many options, including short-term, medium-term and long-term loans - but what does this all mean?

 

If you don't select an appropriate length of time based on your needs as a small entrepreneur, then it could hurt not only your prospects but also your financial stability in general.

 

MATCH CASH FLOW TO LOAN TERMS!

 

Business owners and their financial managers should choose financing terms that align with their current and future cash flow needs.

 

The shorter loan terms offer shorter repayment times but more sizable monthly payments. Longer loan terms mean small monthly payments but longer amortizations --and they may not work unless you have a steady cash flow coming in regularly.

 

 

  

THE IMPORTANCE OF CREDIT SCORES

 

  

Business loans will often, but not always, require a good credit score. Safe to say, though, that business owners with good credit will more likely be approved for loans, but those with bad credit may not.

 

 

 DON'T MAKE THIS MISTAKE! STAYING AHEAD OF THE GAME VIA PROPER CREDIT LINE USE

 

 

A working capital line of credit should be used for short-term needs, not long-term ones. Don't confuse short-term working capital needs with long-term, permanent requirements.

 

If credit lines provide one thing it certainly is  ' flexibility ' as it relates to your financing ' wiggle room '. You're borrowing what you need and, of course, only incurring charges for amounts you use which hopefully are constantly revolving as you turn over key assets such as receivables and inventory. Invoice financing is key to running a successful growing business.

 

  

FACTORS AFFECTING LOAN TERM OPTIONS  

 

When considering the type of business loan that will best suit your needs, it's essential first to determine what you hope to use this money for. Beyond deciding which term is right for our situation and given financial circumstances, two other factors are involved in choosing a financing solution: interest rate and potential cost versus cash flows.

 

REASONS YOUR FIRM MIGHT NEED MORE WORKING CAPITAL

 

The cash flow of your business can be volatile. You may need additional capital during the peak seasons or to keep up when there’s less money coming in due to time pressures from suppliers, employees, and government regulations demanding attention all the time.

 

Almost all companies will experience times when more working funds are required just so obligations such as payrolls go through without interruption! ...but these instances typically come at different intervals.

 

Seasonal fluctuations in business cash flow are not uncommon. This can be because many companies need added capital at peak seasons or when they receive less revenue. Others may require more money so their operations keep running smoothly during these slower times of year without cutting back on expenses.

 

Almost all businesses will experience boom-and-bust cycles. Even more, flexibility comes around simply knowing and understanding that your firm can handle the day-to-day surprises ' - aka ‘bulge ' cash flow needs around one of, or seasonal business expenses.

 

Credit lines are of course, also not term debt - while your business assets typically collateralize them, it's at the end of the day, somewhat unsecured.

 

Knowing and understanding the true financial health of your business will often dictate what type of facility you're eligible for. Key to that of course, is how long you've been in business, what type of financing rates your firm can handle, and speed and accessibility to financing approval.

 

Thousands of businesses with SME COMMERCIAL FINANCE needs take advantage of short-term working capital loans, often marketed (or disguised?) as business credit lines and typically not used for more established businesses.

 

They are sought after because they offer quick approvals and approval criteria are far less restrictive than those solutions offered by Canadian chartered banks and provide the additional working capital needed.

 

From a financial perspective, your company's health will typically dictate the type of credit line your firm can access. The two most typical solutions are traditional banking or asset-based lines of credit for funding current assets offered by non-bank commercial lenders.

 

UNSECURED LINES OF CREDIT

 

Unsecured, revolving lines of credit  & unsecured loans are effective tools for augmenting your working capital for a more established business. They provide you with a valuable tool via the ability to finance temporary needs via a small business line of credit.

 

The Line of Credit is a business tool that can be used to help you grow your company. It's important for businesses since they may not always want or need one. Still, instead, use it as needed based on their revenue and balance sheet needs -your firm will pay interest on the facility used at any given time -A personal guarantee is required on unsecured credit lines.

 

Banks as an example, will consider focusing on issues such as business credit history and looking into the healthiness (and longevity) outside an individual’s financial statements: working capital ratio, networking cash position versus annual revenues, copies of bank statements, etc. Although many factors may affect the size of your working capital line of credit, a rule of thumb is that it shouldn’t exceed 10% of your company’s revenues.

 

Knowing how well your business is running and how to calculate working capital needs in the short term is key to both supplier and credit line provider relationships. While volumes are written on how business financial health is determined, the real world dictates it all boils down to:

 

Profit/loss generation

Operating Cash Flows

Positive/Negative net working capital positions

Existing debt

 

 

  

KEY TAKEAWAYS - ASSET FINANCING AS A WORKING CAPITAL CASH FLOW SOLUTION  

 

Asset Financing is tied directly to business asset values.

 

Asset finance for working capital is a good choice if options are limited for other cash flow financing needs.

 

Business lines of credit  are asset-based loans around a fixed amount based on asset values

 

Lines of credit can be secured or unsecured.

 

Businesses use working capital facilities to fund seasonal or cyclical cash flow gaps and fund day-to-day needs and expenses.

 

 

 

 

  

CONCLUSION - THE BENEFITS OF ASSET FINANCING FOR A BUSINESS CREDIT LINE AND WORKING CAPITAL GROWTH

 

If you’re looking for solid assistance and the cash flow/working capital solutions available in the Canadian marketplace call  7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can provide business credit line offerings and business growth strategies that meet your needs in the small business lending marketplace.

 

Let's explore those asset finance advantages: a working capital loan solution or a business credit line via traditional lenders or non-bank alternative financing firms.

 

FAQ/FREQUENTLY ASKED QUESTIONS / MORE INFORMATION

 

  

What is working capital financing? 

 

The funding of working capital financing is borrowing solutions focused on a company's ability to cover day-to-day expenses and commitments around current liabilities. This type of financing should not be used to purchase equipment and other long-term assets or real estate.  Businesses can also use short-term working capital loans or business credit for immediate cash flow needs.

 

  

What are the benefits of using asset finance for business credit lines and working capital?   

 

A key benefit of using an asset finance strategy for a business credit line is that it allows businesses t obtain financing using only the business assets as collateral while at the same time retaining the full use of those assets. This method of financing a company provides a flexible financing option versus the constraints around traditional bank loans as funding can be achieved more quickly and easily. The ability to generate additional revenue and profits based on cash resources is a key benefit.

Firms that are financially challenged but who have or can increase good gross margins can typically absorb the higher interest rates that come with non-bank business credit lines, often referred to as 'ABLs' -  Asset-Based Credit Lines.

 

 How can businesses determine if asset finance is the right option for their credit lines and working capital needs? 

 

Businesses should consider several factors when deciding if asset finance is the right option for their credit lines and working capital needs.  Issues that should be considered include the value of key business assets and the amount of cash flow financing/working capital the business needs. 

 

Asset financing should be compared to other potential financing options such as unsecured credit lines offered by banks to determine the best suitable option for running and growing the business. Borrowers should also ensure business loan requirements are understood around key issues such as business creditworthiness and credit history.

 

 

What is an asset-based lending line of credit? 

Asset-based lending lines of credit, also called ' ABL'S) is a type of business borrowing and financing where business lenders provide revolving credit facilities based on accounts receivable generated by ales, inventories, and fixed assets - If a company owns real estate that can also be factored into the facility.  These credit lines are used by businesses that can't access some of the business credit they need to fund working capital needs around cash management. These facilities allow a company to arrange borrowed capital they require in the future.

 

 How does asset finance work in Canada?  

 

Asset finance allows Canadian firms to use assets as collateral for a loan or line of credit. Lenders value assets and provide financing based on that value. In addition to working capital lines of credit asset finance is a valuable asset strategy that can also be used to describe equipment financing and real estate financing in business operations.