Asset Based Line Of Credit : A Working Capital Alternative

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Time For Some Fancy Footwork Around Your Business Financing & Line Of Credit Needs?

OVERVIEW – Information on how an asset based line of credit is a formula for higher receivables and inventory financing in Canada and how these lending facilities offer a true working capital alternative








An asset based line of credit is an emerging financial alternative in Canada for companies of all size who wish to maximize working capital in terms of their growth needs.

More often than not asset based lending is associated with companies who are unable to arrange or qualify for what most business owner’s term as a bank operating line of credit.

Traditional bank financing places a heavy emphasis on the overall financial position of your income statement and balance sheet. Therefore, if that is the focus then firms such as yours with either balance sheet issues, or experiencing temporary financial losses or one of negative circumstances do not quality for margined lines of credit with institutions such as Canadian chartered banks.

Asset based lines of credit take the reverse position, simply that you have the assets, so lets finance your firm on the strength of your assets, with minimal, if any in fact, focus on ratios, covenants, outside collateral , operating metrics, etc .

An asset based line of credit partner will tend to work through with you unique challenges in your industry or your business model. Some of those challenges might be the seasonality of your business or the special ‘one of ‘situations we referred to. Some of those circumstances might be making an acquisition, restructuring your firm, or being in the receipt of large new contacts or purchase orders that are out of line with your traditional financing arrangements.

Operating capital financing, or rather the lack thereof! can often be the reason your firm is unable to take advantage of strong market opportunities to maintain your competitiveness.

One of the largest parts of an asset based lending facility is receivables financing. In small firms this is often taken care of by a factoring facility – your invoices are sold to the lender, you receive immediate cash, and you can structure facilities around such issues as credit insurance, non recourse to your firm, etc.

The asset based line of credit, in a true sense, offers all of the advantages of factoring, but operates instead like a true bank facility – your receivables, and inventory, are highly margined to the maximum value, and your access to cash availability is directly commensurate to your sales growth – in other words you have no real cap on your operating facility – you receive cash for receivables and inventory as fast as you can sell and move our product and services!

Your firm will probably find that anyone in the asset based financed area has a stronger knowledge of your business model and assets.

We recommend that you seek out and talk to an experienced and credible advisor in Canadian business financing to determine if the advantages of an asset based line of credit work for your firm!


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

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 .

' 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

Working Capital & Business Lines of Credit and Loans That Work : Your Must Know Strategy

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Discover These Non Painstaking Solutions To Business Financing Success

OVERVIEW – Information on working capital solutions in Canada. Business lines of credit and the right loans for your business depend on these key factors to financing success

Business lines of credit & the right loans for your business deliver on working capital, cash flow and growth for your company; they can come at a painstaking price it seems sometimes. We're exploring the strategies that allow you to be having business finance success in this area. Let's dig in.

When business owners and financial managers have successfully negotiated working capital facilities or term loans it should not be the end of the story. By that we mean that the business owner and financial mgrs must continually focus on what the bank or other financial institution requires, and more importantly, how lenders view the customer from a control point of view. So how does the lender exert control on your business?

Knowing the balance sheet must be a top focus for the business owner - once a firm is over leveraged, i.e. borrowing too heavily, the bank or commercial lender generally starts positioning around their overall security or your ability to de-leverage.

Borrowers must be comfortable and knowledgeable about the use of 'triggers '. Triggers are the implied actions the bank or institution will take when things aren't working out. This can include everything from general poor financial performance to very specific pre agreed upon financial ratios. And the business owner must remember that he or she agreed to and concurred with these ratios.

Banks want to see cash flow ' flowing ' - flowing to repay their debt - so there may be triggers put in place by the bank to ensure that minimum cash flow standards are kept, and also that owners and shareholders do not withdraw excess funds.

Over time business owners will probably find, in our experience, that the bank restrictions either tighten up or loosen, depending of course on the overall comfort level the bank has with the firm. Clearly firms that seem temporarily challenged in profits and balance sheet quality will receive much more scrutiny.

Business owners can do some very solid and valuable preparatory work in negotiation of bank triggers. If they have a solid long term history of earnings this should be a very strong negotiating point with the institution.

Simply by self introspection of the firm can the owner or financial manager focus on what is going to go wrong re sales, pricing, forex, etc. The owner needs to be able to talk to these issues and show how he could address them. Also remember that those traditional lending sources such as banks are not the only way to finance a business these days.

Other solutions in the alternative sector include:

A/R Financing/ Factoring

Inventory Loans

Purchase Order Financing

Non bank asset based lines of credit

Tax Credit Financing

Sale leasebacks

Using 'what if 'scenarios help immensely and will position yourself as knowledgeable about your business.

Discussions with your bank need not be absolute and immediate on any time of loan negotiation - you can get a great informal sense of what the bank is thinking and work from that point forward. Try and read between the lines as to what is hot, and what a Vis is not with the bank Vis their perception of your firm, industry, etc.

In summary, business owners need to show maximum flexibility on working capital and loan negotiations. Negotiations should be from strength, accentuating the positive.

Example - strong forecast sales and profits can potentially offset a weaker balance sheet. That's when those alternative financials solutions should well be investigated. Trade-offs with the bank are also encouraged- and fewer triggers and covenants are better than more!

And yes, there is more than one bank in the world, although business owners should be cautioned that shopping around is not optimal at all times, and can in fact backfire, particularly for a small business. Business owner beware! And seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help avoid those painstaking finance errors.


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