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Asset-Based Line of Credit: A Flexible Alternative to Traditional Bank Financing
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Discover the Power of Asset-Based Lines of Credit: A Game-Changer for Business Financing
Canadian business owners and financial managers place great importance on their ability to achieve and maintain operating lines of credit.
Asset-Based Lines of Credit: The Flexible Financing Solution Your Business Needs Now
Asset-based credit lines are part of the asset-based lending solution in Canada - they are a viable alternative to traditional bank lines of credit and allow companies to borrow under a revolving line of credit facility based on sales and assets. This business credit line financing method is flexible and accessible by most companies utilizing credit lines to fund day-to-day operations. If your business has sales and physical assets and you need cash flow, ABL financing is the solution.
UNDERSTANDING BANK FINANCING / BANK CREDIT LINES / UNSECURED LOANS
WHAT ARE THE OPTIMAL USES FOR ASSET-BASED CREDIT LINES?
Many businesses are looking to refinance existing credit facilities, and asset-based loan solutions are often a more favourable and accessible option.
Businesses experiencing rapid growth can access the capital they need without violating existing financial covenants with existing lenders - allowing the company to expand on its business goals via liquid assets such as accounts receivables.
Some businesses that are focused on a turnaround or restructuring use the leverage of sales and assets to stabilize the business, access cash flow, and manage the turnaround process on the route back to more traditional financing
Companies looking to acquire or buyout another competitor or business can access the capital in the target business to facilitate a business purchase/ business transfer of ownership.
ASSESSING THE NEED FOR A SOLID LINE OF CREDIT SOLUTION
HOW DO ASSET-BASED LENDING SOLUTIONS INCREASE BORROWING POWER
WHAT ARE THE BENEFITS OF ASSET BASED FINANCING FOR YOUR BUSINESS?
Financing that is flexible and tailored and structured to your unique needs
Access to business capital based on sales and eligible assets as collateral for an ongoing borrowing based
No focus on historical cash flow / financial covenants
Encourages financing for high-growth firms
CONCLUSION
Business owners should recognize they have financing options for growth capital and the ability to overcome constant cash flow challenges. Alternatives to bank finance offer access to working capital for any growing or leveraged business and unable to meet traditional financial institution requirements.
FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION
WHY CHOOSE ASSET BASED LENDING OVER SECURED LOANS?
Asset-based lending solutions will almost always provide access to more capital versus unsecured bank loans with lower margins on borrowing, the need for financial covenants and outside collateral, and a focus on personal guarantees.
Asset-based financing is flexible and tailored to business assets and sales
Secured loan financing is quicker to process for credit approval - Requirements are based on collateral versus overall creditworthiness.
Interest rates are competitive and sometimes, but not always, are lower than bank rates under certain conditions.
WHAT IS THE ASSET BASED LENDING DUE DILIGENCE PROCESS
Asset-based lenders focus on evaluating financial assets, including reviews of financial statements and relevant business documents.
Assets financed must not be subject to any existing liens by other lenders or the government.
An industry review will typically be done around the company's business model.
WHAT IS THE DIFFERENCE BETWEEN ASSET BASED LENDING AND FACTORING?
Asset-based loans focus on collateral around receivables from sales and other specific business assets - factoring is the sale of the accounts receivable to a third-party finance firm.
Companies maintain ownership and control of assets in asset-based loan solutions - when receivables are sold in a factoring facility, the factoring company owns the receivable.
Asset-based lending solutions offer higher financing given that all business collateral is secured under a loan facility, while factoring is limited to accounts receivable sold b the company.
In factoring, no regular payments are required; as receivables are collected, a fee is taken by the factoring company to advance the funds at the time of sale of the receivable.
Both ABL and factoring offer short-term financing solutions for businesses - Differences arise around the cost of financing, the amount of achievable funding, and the ownership of assets financed.
Click here for the business finance track record of 7 Park Avenue Financial
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