Asset Based Lines Of Credit : Perfectly Matching Your Business Finance Needs?

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Asset based Lines of Credit –

Canada’s Newest Business Financing Option!

OVERVIEW – Information on asset based lines of credit in Canada. This relatively newer business finance options allows companies to achieve revolving credit lines that are non bank in nature – they are suitable for fast growing companies and firms that have challenges in accessing traditional bank capital

An asset based line of credit is a newer business financing tool / solution that owners/financial mgrs keep hearing about. And they want more info - so let's dig in.

Similar to other forms of business financing that are newer and not yet in fullest use in Canada asset based financing, also called ' ABL ' financing evolves from the U.S. and the U.K. . . . The industry originally started as a simply 'factoring 'or receivable finance arrangement.

What asset based lending does is to take that basic concept of factoring and include all your other ' assets ', which traditionally are inventory, equipment, and in some cases the actual purchase orders and contracts that your firm receives and wishes to fulfill.

When we sit down with our customers and they ask us for information on asset based lending we find ourselves often explaining right out of the gate that asset based lending is not a ' lending of last resort '. Most of our customers are surprised to hear that some of the largest corporations in Canada and the U.S. finance their business through asset based lending.

The fact that you as a Canadian business owner can leverage not only your receivables for liquidity, but your inventory, contracts, and equipment and real estate naturally brings true liquidity to the table.

Many customers we work with immediately see asset based financing as a major competitive advantage, enabling them to improve relations with suppliers and grow sales with new or existing customers.

In some instances we have pointed out to clients that our best financing solution for a merger or acquisition scenario is an asset based lending arrangement as it maximizes the true asset and capital power of both firms.


In 2008 and 2009 Canada, like many other countries, or in fact all the world experienced a major liquidity crisis. As banks and independent finance companies pulled back on business line of credit, not always because they wanted to, but because they had to, asset based lending continue to offer more liquidity to customers who were working capital and cash flow challenged.

Naturally as many Canadian firms had balance sheet and income statement erosion, (I.E. financial losses) the challenge of what one could call ' traditional ' financing became even greater.


Many of our customers scrambled to get their balance sheets in order, as for the first time in May years loan covenants were in breach, etc.
We don't want to say that the banks and other large finance firms in Canada let Canadian business owners down, but certainly many times it felt like that, and the welcome comfort of an asset based lending arrangement saved the day for many a firm of all sizes .

Bottom line? Asset based lending has risen to the top of the pile with respect to a robust full financing options for Canadian firms looking for financing for a combo of one or all of receivables, inventory, equipment, real estate, and contracts .

Speak with a credible, experienced and trusted advisor in asset based lending to determine if it's your firms 'holy grail 'of Canadian financing!



7 Park Avenue Financial :

http://www.7parkavenuefinancial.com


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 .







7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
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

Straight Talk On Why Asset Based Lines Of Credit Are Alternatives To Debt Financing

Canadian business owners and financial managers continue to hear about newer forms of business financing in Canada, particularly asset based finance, and even more particularly an asset based line of credit facility.

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 .

--

Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/asset_based_lines_of_credit_debt_financing.html

What Asset Based Finance Could Do For Your Company

Your company is facing a variety of challenges – many of them tend to be business financing related. The challenges can be positive in nature, and some might pose serious threats to your business growth or even existence. How asset can based finance aid your firm in allowing you to generate the working capital and cash flow you need to prosper and grow, let alone survive?

Asset based financed helps your firm in both good time and challenging times. The reality is that most business owners and financial managers in Canada currently don’t think we are in ‘good times ‘and business financing continues to be a huge challenge.

Asset based finance comes in a variety of forms – it is commonly in the industry itself referred to as ‘ ABL ‘ financing, and typically your firm would negotiate what is simply or commonly known as an asset based line of credit . The facility provides you with a revolving line of credit very similar to a chartered bank facility – it might also include a significant inventory financing component, and usually address what we could best call special needs or special situations re: turnarounds, growth, distress, etc.

The best candidate for an asset based finance line of credit is a firm that is experiencing strong growth but can’t attract the traditional capital that is used to finance receivables, inventory, plant and equipment, and even in some cases real estate.
An asset based line of credit can best be described as a ‘creative’ financing solution – that is because it takes your balance sheet and finances it to the desired ‘max’ based upon your different asset components. In some cases even intellectual property or patents might be included in the overall financing, although that clearly is not the norm.

Pricing in Canada on asset based lines of credit is all over the map – We tell clients they can expect to pay anywhere near a point or two over prime up to an including 1.5-2% per month . What defines that huge difference in pricing is what our clients are always asking. The answer is that that there are different what we will call ‘ tiers ‘ in ABL lending in Canada, and the overall size and deal quality of your firm will ultimately drive you to an asset based finance partner that more closely matches your needs and your overall ‘ risk profile ‘.

The reality is that asset based finance has somewhat changed the overall face of business financing in Canada and more and more firms , both large and small are gravitating to this form of finance . Deal sizes in Canada vary greatly – we do not encourage clients who have an under 250k/mo need to explore asset based finance because at a certain point the reporting, costs, etc done make sense for neither your firm or the ABL lender .

Asset based lending margins your assets to the extend of their current market value. Inventory financing is a major component of your facility if you require that, and inventory financing in Canada, from traditional sources, is difficult to arrange.

Is there any downside in asset based lending and an ABL working capital facility? Our clients ask. With relative certainty we can say any downside is significantly offset by upside. The facility gives you almost unlimited working capital, and margins assets that might otherwise not be finance able. And dont forget, this type of facility does not add debt to your balance sheet, you are simply monetizing your hard and in some cases soft assets.

Speak to a trusted, credible and experience advisor in asset based lending who can highlight financing options that make sense for your firm’s survival and growth.