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Can Asset Based Lending Also Be Your Working Capital Solution?
OVERVIEW – Information on business financing methods in Canada and how asset based lending gains momentum for firms looked for larger operating facilities to facilitate working capital and growth needs
We're examining asset based financing from the viewpoint of it being an alternative to a bank line of credit facility. Another way of describing this type of facility is to view it as the full service offering that is directly comparable to a Canadian chartered bank facility, commonly called an operating line of credit.
These types of facilities are of course not long term debt of term loan type scenarios. Can we put it any more simply than it’s your day to day business credit facility that facilitates payment to suppliers, employees, etc? And by the way it's a great way to grow your business lock step with the financing you need.
What we could call the ' full service ' asset based financing lending model is a facility that is usually a non bank financing arrangement with an independent finance firm that specializes in this type of facility .
It monetizes your current assets, which are typically receivables and inventory. However , there is often what we could describe as an upside kicker to the asset based line of credit because it can also easily margin, from a working capital perspective any unencumbered equipment and real estate that you have .
The other unique way in which asset based lending addressing working capital is that it also allows you, if you choose to margin and borrow against your equipment and real estate, all under that revolving line of credit facility .
In discussing this financing alternative with clients we point out that the alternative to the full service type of facility (which is typically for larger firms) is an asset based financing lending facility that we call a working capital line of credit. It is generally under 250k and typically just finances receivables. Our favorite and in fact preferred type of facility is one in which your receivables are financed directly but you retain billing and collection control. We call that Confidential Receivable financing!
Questions? Typically clients ask:
What does it cost?
How does it work?
Is it the right solution for my firm?
Depending on the size of your facility pricing for asset based lines of credit can be very competitive to bank rates. Larger facilities take 30-45 days to fully set up properly. It should be no secret to the reader that a typical application would include a business credit application, financial statements, and aged asset lists of receivables and inventory.
How is the size of the facility determined? Receivables are margined at 90% and inventory, depending on your industry, can be margined from anywhere from 25-70% in our experience. Most firms could never get that amount of financing on inventory from a bank.
So what’s all the hoopla? We can summarize it by saying its simply an alternative to bank financing when you can’t meet bank criteria , its competitive if you have a solid asset base and business prospects , and it provides you with unlimited cash flow and working capital funding as your business grows .
Confused? Hopefully not. Interested - hopefully so. Speak to a trusted , credible and experienced Canadian business financing advisor as to what business financing methods might alter your firms success and investigate asset based financing lending as a solid choice or alternative .
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 .
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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
