Asset Based Financing Loans In Canada : How To Achieve The Right Mix Of Business Credit

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YOUR COMPANY IS LOOKING FOR CANADIAN ASSET-BASED LOANS FINANCING! 

Say Goodbye to Business Credit Cash Flow Challenges: Exploring Asset-Based Financing in Canada

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?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

 

Unlock Financial Flexibility: Discover the Advantages of Asset-Based Financing Business Credit Loans

 

Asset based financing is a unique part of the business finance landscape in Canada, providing flexible financing to businesses of all sizes and industries. Let's dig in!

 

INTRODUCTION

 

Maintaining a robust cash flow is a cornerstone of any business's success in today's swiftly changing Canadian business financing environment. However, accessing conventional financing can pose a hurdle for many firms for many different reasons.

 

Here, asset-backed lending presents a solid solution. Asset-backed lending utilizes a unique methodology to address liquidity issues by using a firm's physical assets like inventory, machinery, and accounts receivable as collateral. This flexible funding solution provides firms with the necessary capital to cater to immediate liquidity requirements, finance growth strategies, and capitalize on new market prospects.

 

Through asset-backed lending, enterprises can monetize the worth of their assets, enhance their financial adaptability, and confidently maneuver through liquidity challenges in their business.

 

Business owners and financial managers want to know how they can utilize these types of loans as a great solution for cash flow and working capital purposes to fund their business.

 

UNDERSTANDING ASSET BASED FINANCING

 

Asset-backed lending is a financial solution enabling companies to obtain loans or credit lines by pledging their assets as security.

 

Unlike conventional funding methods that heavily depend on a firm's credit score, asset-backed lending considers the company's asset value. Businesses can exploit assets like inventory, machinery, and accounts receivable to generate capital to overcome liquidity problems and spur expansion.

 

This method of financing proves especially advantageous for entities that fail to meet the rigid standards set by traditional financiers. These include newly established enterprises, companies with minimal business credit history, or those operating in sectors subject to seasonal variances.

 

By collateralizing tangible assets, asset-backed lending offers an alternate financing route that bridges liquidity shortfalls and sustains business activities during difficult periods.

 

  

WHAT DOES ASSET BASED LENDING MEAN FOR YOUR BUSINESS  

 

The reality is that asset-based lending means different things to different business folks. The truth is that it's part of the nontraditional method of financing a business in Canada that might be temporary or in some cases, more permanently challenging.

 

Although the owner/manager might think their need is somewhat unique, financing needs typically revolve around sales growth or key balance sheet issues that need a fix. We've never missed the true irony around how fast-growing or even explosive sales can become a huge financial and operational challenge, as many have experienced.

 

Fixed assets are often a key part of an ABL lending solution for additional liquidity. The equipment your company requires or has can be in a broad range of asset categories. Owners/financial managers are looking to acquire new or used equipment or refinance existing assets via better high leverage  - That 'refinancing' can often be part of a 'sale leaseback', a key category in asset-based lending. That strategy allows owners to 'free up' equity in assets and harness that equity via new cash flow and working capital.

 

How does that sale-leaseback strategy work for certain physical assets?  It's quite simple. Although business owners often have a strong sense of what a company's assets are worth, that is not what counts. It all usually comes down to an appraisal being done on the equipment, and when the appraisal comes back, a loan-to-value ratio decision is made against the appraised value.

 

For example, a lender may grant for a specific asset up to 90% of the face value for a security, 75% for residential real estate, or 60% if it is commercial. Real estate ABL is often a term loan structure with various options available, such as interest-only, annual renewals, prepayment conditions, etc

 

Usually, business owners can expect to receive a fairly high percentage of the liquidation value of the equipment and achieve the maximum loan amount. Still, this amount tends to be less than the asset's fair market value. It is essential to understand that the asset has to be free and clear of any liens or charges. In cases where a small amount might be owed to another lender, that amount can be paid out and bundled into the new loan transaction.

 

A key point in equipment refinancing is that the commercial lender will emphasize both the asset value and your firm’s ability to prove cash flow for repayment.

 

 There is a huge difference in how an asset-based lender looks at your asset and advances funds against it, versus a Canadian chartered bank.

 

There is technically no limit on the amount that can be advanced against equipment, although most transactions we see in the marketplace are less than 5M dollars.

 

In summary, asset-based financing means different things to different people. One of the key context areas of this type of financing is equipment financing -  yet numerous other forms of key categories in asset-based lending play a key part in solutions your firm might require and have access to.

 

 

TYPES OF ASSET-BASED FINANCING AVAILABLE TO CANADIAN BUSINESSES FOR OPTIMAL WORKING CAPITAL 

 

Accounts Receivable Financing solutions:  Factoring, Confidential Receivable Finance Via factoring companies

 

Inventory Financing Loans

 

Tax Credit Financing (Primarily SR&ED)

 

Cash flow loans

 

Equipment Leasing

 

Royalty Financing

 

Bridge Loans

 

 

HOW ASSET-BASED FINANCE SOLUTIONS HELP OVERCOME THE CASH FLOW CHALLENGE

 

Asset-backed lending can be a lifesaver for firms grappling with liquidity problems. By using assets like stock, machinery, and accounts receivable, companies can acquire the necessary capital to balance their payable and receivable accounts, ensuring seamless business operations.

 

A principal advantage of asset-backed lending is its adaptability. Unlike traditional funding options, asset-backed lending is not restricted to a particular purpose.

 

Companies can utilize the funds obtained through asset-backed lending for diverse objectives, like acquiring stock, covering payroll expenses, investing in new machinery, or financing promotional campaigns. This flexibility enables companies to meet immediate liquidity needs while supporting long-term growth plans.

 

Furthermore, asset-backed lending can aid companies in bolstering their financial stance. By capitalizing on the value of their assets, companies can liberate otherwise occupied capital. This enhanced financial flexibility can be used to negotiate more favourable terms with suppliers, capitalize on early payment discounts, or invest in strategic initiatives that improve profitability.

 

CASE STUDIES : 

 

Case Study 1: Manufacturer

A manufacturing firm confronted a severe liquidity crunch resulting from delayed client payments and the necessity to procure new machinery to satisfy escalating demand. The firm opted for asset-based financing, employing their accounts receivable and machinery as security. This decision facilitated them in acquiring a significant credit line, enabling them to purchase the needed equipment and bridge the liquidity gap. Thus, they could fulfill orders, augment their production capacity, and ultimately expand their operations, demonstrating how asset-based financing solutions can aid in overcoming financial hurdles and fostering business growth.

 

Case Study 2: Retailer

During a seasonal downturn, a retail outlet encountered liquidity issues. They held a large stock but suffered from limited cash flow due to declining sales. The retail outlet addressed its financial needs via asset-based financing, using its inventory as collateral.

 

The capital obtained allowed them to sustain their operations, settle supplier invoices promptly, and initiate marketing strategies to stimulate sales during the slow season. Asset-based financing's financial flexibility allowed the retail outlet to successfully steer through the liquidity obstacles and prepare for expansion, highlighting its effectiveness as a financing solution during challenging times.

 

 SUMMARY OF BENEFITS OF ASSET BASED  ' ABL ' FINANCING 

 

Asset-backed financing provides numerous advantages for businesses dealing with liquidity issues:

1. Access to Capital: Unlike traditional financing options involving protracted approval procedures, asset-based financing enables firms to leverage their existing assets to procure funding rapidly. This becomes particularly beneficial when urgent liquidity needs crop up, or firms aim to capture new market opportunities.

2. Enhanced Financial Flexibility: Asset-based financing doesn't rely solely on a company's creditworthiness. Instead, it focuses on the value of a pledged asset as collateral. Liquid assets such as accounts receivable are a large part of asset-based credit lines. This gives firms with imperfect credit histories or limited creditworthiness a chance to access funding based on their assets' strength. It also provides a pathway for businesses to realize the value of their assets and free up capital that could otherwise be locked up and underused.

3. Support for Business Growth: An asset-based loan can facilitate business expansion compared to traditional bank loan financing or an unsecured loan/business credit line / revolving line of credit. By offering access to capital, firms can invest in growth strategies, such as enlarging operations, introducing new products or services, or penetrating new markets. This ability to finance growth initiatives is vital for businesses striving to stay competitive and seize market opportunities.

 

CONCLUSION

 

Companies often confront liquidity issues in the present economic environment and might find conventional financing avenues inadequate. Here, asset-backed lending provides an intelligent resolution. By collateralizing tangible assets, companies can obtain the necessary capital to alleviate liquidity problems, finance growth strategies, and navigate uncertain periods.

 

Asset-backed lending has numerous advantages, including rapid capital access, enhanced financial adaptability, and backing for business expansion. Companies can make enlightened decisions about their funding requirements by comprehending the range of assets that can be collateralized, the procedure to secure asset-backed financing, and the considerations when selecting a financier.

 

Although asset-backed lending can transform many companies' financial situations, exploring alternative funding options and considering what best aligns with your company's distinct needs and objectives is crucial. By diligently scrutinizing your choices and collaborating with the appropriate finance partner, you can surmount liquidity problems and set your company up for enduring success in the current market.

 

 

Whether your firm is growing quickly, has restructuring issues, or other unique situations, you will benefit from call to  7 Park Avenue Financial,   a trusted, credible, and experienced Canadian business financing advisor with a track record of success to help with your growth opportunities via asset-based lenders in Canada.

 

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION

 

What is asset based finance?

The asset-based lending industry provides commercial finance  & financing via revolving lines of credit and term loans to small and mid-sized companies and larger corporations by using their collateral as security for short-term needs and day-to-day operations funding.

 

Accounts receivable, inventory, equipment, and real estate are collateral to back the loan for a line of credit or other business loan structure - this provides greater credit availability for companies that might not meet the credit history requirement of traditional financial institutions such as banks that offer unsecured loans. Lower interest rates for asset-based loans are commensurate with overall credit quality.

 

What are Common Challenges Faced by Businesses When Accessing Financing

 

In today's commercial landscape, companies encounter several hurdles that can affect their liquidity:

1. Unpredictable Customer Payment Cycles: Late or deferred customer payments can disrupt a firm's cash flow and make meeting financial obligations difficult. Additionally, companies operating in seasonal industries may face periods of booming demand followed by slower times, which can strain liquidity.

2. Limited Traditional Financing Options for SMEs: Small and medium-sized enterprises often struggle to access bank loans due to their limited credit history or lack of collateral. This can make securing essential funding to address liquidity issues or finance growth strategies challenging.

3. Economic Uncertainties and Market Volatilities: Changes in market conditions, alterations in consumer behaviour, or supply chain disruptions can all bear significant financial implications for businesses.

 

What Are Types of Assets That Can Be Used for Financing

 

Asset-backed financing can be obtained using a variety of physical assets owned by a company. The most frequently used types of assets for this kind of financing include:

1. Inventory: Firms can employ their stock as collateral to secure financing. This is particularly advantageous for companies with substantial inventory volumes or seasonal inventory fluctuations.

2. Equipment: Financing that uses machinery, vehicles, or other apparatus as collateral is known as equipment financing. This is especially beneficial for sectors that heavily depend on specialized equipment.

3. Accounts Receivable: Also referred to as invoice financing, accounts receivable financing allows firms to use their outstanding invoices as collateral. This enables businesses to access funds quickly rather than waiting for their customers to settle invoices.

4. Real Estate: Firms that possess commercial properties or real estate assets can leverage them as collateral to obtain asset-based financing. Real estate collateral can grant businesses access to larger financing amounts.

 

The specific assets eligible for collateral may vary based on the financier and the industry in which the firm operates. Businesses must comprehend the particular prerequisites and constraints of different asset-backed financing alternatives.

 

 

 

What Is The Process of Obtaining Asset Based Financing

 

The procedure for acquiring asset-based financing generally involves several crucial stages. While specifics can fluctuate based on the financier, the overall process can be broadly outlined as:

1. Application: The firm applies for asset-based financing by applying a financier. The application usually comprises details about the company, its financial status, and the assets designated as collateral.

2. Asset Evaluation: The financier evaluates the worth and quality of the assets employed as collateral. This assessment aids in determining the maximum sum that can be procured.

3. Due Diligence: The financier performs due diligence on the company, reviewing its financial statements, credit history, and industry prospects. This step assists the financier in assessing the comprehensive risk associated with extending financing to the company.

4. Proposal: Based on the assessment and due diligence, the financier offers a proposal detailing the terms and conditions of the asset-based financing. This includes the loan amount, interest rate, repayment terms, and miscellaneous fees.

5. Closing: If the firm consents to the proposed terms, the financier and the firm complete the required paperwork to formalize the financing agreement. This could involve legal documentation, security agreements, and other contractual duties.

6. Funding: Once the closing process is finalized, the financier disburses the approved funds to the firm. The firm can utilize the funds to address liquidity issues, finance growth strategies, or fulfill other financial responsibilities.

 

 

Alternatives to Asset-Based Financing

 

While asset-based financing can provide numerous advantages, exploring other financing alternatives that may be more aligned with your business needs is crucial. These alternatives could include:

1. Traditional Bank Loans: For businesses with robust credit histories and solid banking relationships, traditional bank loans can offer access to funds at competitive rates. However, these loans often demand collateral and may entail a more comprehensive approval process.

2. Business Credit Cards: These can serve as a short-term financing solution to address urgent liquidity needs. While they provide convenience and adaptability, they usually carry higher interest rates than other financing options.

3. Trade Credit: This involves negotiating extended payment durations with suppliers. It can assist businesses in managing cash flow by permitting them to delay payments until goods have been sold or services delivered.

4. Invoice Factoring: This entails selling your outstanding invoices to a third-party company at a discounted rate in exchange for immediate cash. It can be an effective method to enhance cash flow and evade the wait for customer payments.

 

Each financing option has its unique benefits and considerations. Hence, businesses must evaluate their particular needs, financial circumstances, and growth targets to identify the most appropriate financing solution.

Click here for the business finance track record of 7 Park Avenue Financial

Business Financing Sources In Canada : Funding Options Unveiled

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YOUR COMPANY IS LOOKING FOR SOURCES OF  BUSINESS FINANCING

Unlocking Business Growth: Traditional Financing vs. Alternative Solutions in Canada

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?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

 

The Evolution of Business Financing in Canada: Traditional vs. Alternative Solutions

 

 

Canada's Business financing sources come with various solutions and costs associated with these loans and cash flow monetization strategies to secure funding. For SME/Small business owners, Is it important to understand these costs and alternatives? We think so! Let's dig in.

 

INTRODUCTION

 

Securing adequate financing is essential to a business's effective operation and expansion, enabling vital functions such as investment, daily operations, and growth.

 

In Canada, companies enjoy a broad spectrum of financing avenues. This article intends to juxtapose traditional financing—largely facilitated by banking institutions—with alternative financing models, including receivable financing and asset-based lending. By delving into the pros and cons of each method, business owners can derive insights to guide their choice for funding, ensuring they align optimally with their specific requirements.

 

 

CONSIDER CASH FLOW FINANCING WHEN YOUR BUSINESS NEEDS CAPITAL! 

 

Typically (in a perfect world - and we know it's not), business owners & financing managers want to know that they can access cash and loans on an ongoing basis. Knowing and understanding the costs and benefits associated with those different types of financing.

 

Working capital needs are often the main driver in seeking supplemental financing. When you understand working capital, you are in a better position to source it!

 

 

  

HOW DOES YOUR COMPANY GENERATE CASH FLOW FROM FINANCING  

 

Therefore, you need to know how to measure working capital regarding your overall business needs.  That’s part of the problem and challenge because when we sit down and work with clients on operating capital and cash flow needs, we quickly determine that working capital and cash flow mean different things to different business owners.

 

The problem usually starts with the business owner assessing his working capital needs and business growth plans by looking at the cash in the company bank account.  That amount doesn’t reflect the 'near cash' tied up in receivables, inventory, prepaid, etc.

 

We can go to the textbook definition also (not our favourite way of doing things) and find out that working capital is simply current assets minus current liabilities, calculated by a quick look at your balance sheet.  We are not a big fan of that calculation simply because it doesn’t give you a true sense of the turnover of those critical balance sheet accounts such as A/R and inventory.  Cash flow is all about the asset turnover of your sales revenue!

 

By the way, don't assume bigger is better in your total working capital amount. The more funds you have tied up in A/R and inventories will put stress on your cash flow needs. That's where constant asset turnover helps - turning inventories and collecting receivables. You should regularly, at least monthly, calculate your day's sales outstanding and inventory turns.

 

 

By the way, even effective payables management will increase cash flow - much to the chagrin of your suppliers! Don't over-manage and ruin vendor relationships which are key to a successful business. Deterioration in supplier/creditor relations is one of the worst things to happen to your business.

 

So now you have a better handle on working capital, what next? You recognize that cash on hand and growing inventory and A/R aren’t helping your cash flow - you need external financing.

 

 TRADITIONAL VERSUS ALTERNATIVE FINANCING 

 

While both traditional and alternative methods are potential paths for business financing, several significant distinctions exist between them. Here is a list of critical factors to consider when choosing:

 

1. Eligibility Criteria: Traditional financing requires a strong credit history and established financial standing. In contrast, alternative financing solutions might be more attainable for businesses with minimal credit or collateral but valuable assets or potential.

2. Funding Speed: Traditional financing might involve a lengthy process, encompassing extensive paperwork and evaluation processes. Conversely, alternative financing solutions often expedite access to funds, enabling businesses to grasp opportunities or promptly resolve urgent needs.

3. Cost and Interest Rates: Traditional financing may offer more favourable interest rates for businesses with strong credit profiles. In contrast, alternative funding often comes with increased costs or fees to offset the risk or enhanced flexibility and access to capital.

4. Flexibility and Control: Traditional financing may impose restrictive covenants or requirements around balance sheet ratios, personal guarantees, and outside collateral, constraining a business's flexibility. On the other hand, alternative financing can offer more freedom, allowing companies to customize their financing strategies to align with their unique needs.

 

 

TRADITIONAL FINANCING SOURCES

 

In choosing between traditional and alternative business financing methods, several key distinctions should be noted:

 

1. Eligibility: Traditional financing typically demands robust credit history and financial stability for financing such as bank loans. However, alternative financing could be more accessible to businesses with limited credit or collateral but with significant assets or potential.

2. Speed of Access to Funds: Traditional financing can involve a protracted process with considerable paperwork and assessments. Man business owners have found that alternative financing often opens access to funding, assisting businesses in seizing opportunities or addressing immediate needs.

3. Cost and Interest Rates: Traditional financing can provide better interest rates for creditworthy businesses. In contrast, the increased costs or fees associated with alternative financing typically balance the risk or flexibility it affords.

4. Flexibility and Control: Traditional financing may enforce strict requirements, limiting a business's manoeuvrability. Conversely, alternative financing allows for more customization, enabling businesses to tailor their financing approaches to specific circumstances.

 

 

 

You achieve external financing by the profits you generate from your business and working capital facilities via a bank loan or business line of credit or solutions via an independent commercial finance company. Your needs might be seasonal or ongoing, depending on your industry.

 

Other more traditional alternatives are bank operating lines of credit. These come with the best rates, currently in Canada's 6-7 % range in early 2023. The only problem?  Great rates but difficult financing to achieve as Canadian chartered banks demand solid financials when granting this facility. A better way to achieve full liquidity via this method is to consider a factoring or asset-based facility.

 

 

  

ALTERNATIVE LENDING FINANCING COSTS  

 

Rates in Canada range from 9% / annum to 1-1.5% per month based on your overall financial position and the size of the facility. But they offer you 100% working capital for all your business financing needs, so that’s a good trade-off. 99% of the time you will have increased your available credit availability by 100% as your receivables are margined at 90%. Inventory financing is also a key part of a non-bank business credit line.

 

So back to our sources of financing and the costs associated with those sources. Of course, you can either generate a working capital term loan or, if it’s a larger facility, it might be called a Sub debt or mezzanine loan. Mezzanine capital comes with a higher interest rate as it is viewed as high risk compared to financing backed by collateral.

 

Essentially they are unsecured cash flow loans with rates in Canada ranging from 10-15% - they are traditionally on a fixed term / fixed-rate basis on principal repayments - 5 years is common. Large corporations issue bonds.

 

CAPITAL FROM DEBT OR EQUITY?

 

You can also put more permanent equity into your business via the equity route injection of bringing in a new shareholder. We are clear with clients that this is the most expensive form of financing because you are giving up future ownership when you access additional equity capital via angel investors, or a venture capitalist/venture capital solution,  or some other source of equity.

 

  

  

FINANCING YOUR COMPANY'S BALANCE SHEET - CASH FLOW LOANS VERSUS ASSET-BACKED LOANS 

  

Other miscellaneous sources of business financing come with various costs but a significant upside to your funding chances. These include:

 

Sale leasebacks - refinancing existing owned assets for cash flow

 

A/R Factoring / Confidential accounts receivable financing - accelerating cash flows via receivable finance solutions which reverse negative cash flow via financing sales revenues - this is not debt financing - it simply monetizes your most liquid asset - accounts receivables!

Small business in Canada is a huge users of factoring solutions. Cash generated via factoring is used for day-to-day business expenses - The risk is especially high for growing businesses. They tend to have higher accounts payable and receivable and greater sums in inventory and other assets.

 

Bridge loans - helps minimize cash outflows via effective refinancing of business-owned assets or existing loans.

 

SR&ED Tax credit loans - The Scientific Research and Experimental Design (SR&ED) program serves as Canada's R&D tax credit scheme and is notably generous. Businesses can recover up to 64% of their eligible expenses through this program, either as a tax credit or a cash refund.

 

Using research tax credits can significantly boost your company's cash flow, lessen your dependence on borrowing—from friends or financial institutions—and increase your available capital. In turn, this facilitates company growth and reduces debt accumulation.

 

SR&ED refundable tax credits provide cash inflows from your r&d investments -  repayment terms are flexible, with no monthly payments being made during the period of a Sred loan - SR&ED and the Federal government guaranteed loan program are the two most popular government financing programs in Canada.

 

Merchant advances for retailers/business credit cards /short-term working capital loans / small business loan solutions for increased cash flow management - a positive credit report on owner/owners is required.

 

Equipment financing - for new and used assets - monthly principal and interest payments on equipment and technology - a finance lease/capital lease is the most commonly used vehicle for acquiring assets via a ' lease to own ' finance strategy - equipment lease payments are tax-deductible as a business expense

 

Non-Bank Credit Lines - asset-based lending business credit lines for short-term loans and covering day-to-day business expenses - as a business grows, credit facilities can be increased almost automatically.

 

Government Guaranteed Loans  - SBL loans benefit startups and businesses with limited collateral or credit history. By guaranteeing a portion of the loan, the SBL reduces the risk for lenders, making it easier for companies to qualify for financing.

 

However, the application process for SBL loans can be intricate and lengthy. Entrepreneurs must supply comprehensive financial details and business plans and demonstrate their capacity to repay the loan. Despite these challenges, SBL loans represent a feasible financing solution for many small businesses. The Canada Small Business Financing Program is sponsored by Industry Canada, our Canadian version of the U.S. small business administration and the SBA LOAN  - transactions are term loans that bring long-term debt to the balance sheet.

 

Commercial Mortgages: Commercial mortgages present a long-term financial solution for enterprises aspiring to buy or develop real estate. These loans, backed by the property, generally come with competitive interest rates.

 

 

GOVERNMENT GRANTS

 

Business Grants and Competitions From Private and Government Agencies For Small Business Financing & start-up funding

 

Entrepreneurs can tap into business grants and competitions as alternative sources of funding. Generally offered by government entities, non-profits, or foundations, grants support specific sectors or initiatives. These non-repayable grants can serve as a valuable source of non-dilutive financing. However, they often come with stringent eligibility requirements and require detailed proposals outlining the proposed utilization of funds.

 

On the flip side, competitions provide entrepreneurs with a platform to present their business concepts to a jury, with the potential of winning monetary awards or investments. Academic institutions, accelerators, or venture capital entities typically organize these contests.

 

Involvement in such competitions can offer funding, invaluable visibility, and networking possibilities. Nevertheless, the competition can be intense, requiring entrepreneurs to deliver a persuasive pitch and a robust business plan to differentiate themselves

. Talk to 7 Park Avenue Financial about financing for matching funds on grants and eligibility criteria.

 

 

 

Talk to 7 Park Avenue Financial about which financial institution offers the program - Typical loan request size is to a maximum of 350k - More money, up to 1 million dollars, is available if real estate is purchased under the program - Leasehold expenses and other assets and technology can be financed under the program which also has very competitive interest rates.

 

  

CONCLUSION - FINANCING SALES & BUSINESS ASSETS  

 

Obtaining adequate financing is pivotal to your business's growth and prosperity. Given the wide array of financing sources, it's crucial to probe and assess each option to pinpoint the one that aligns best with your needs.

 

Conventional financing sources like banks and credit unions may offer lower interest rates, albeit with more stringent eligibility criteria.

 

You can make a well-informed choice by comprehending the advantages and drawbacks of each financing source and contemplating factors like funding volume, repayment conditions, and eligibility requisites.

 

Develop a strong business plan, foster relationships with lenders and investors, enhance your credit rating, brace for due diligence, and solicit expert advice to boost your odds of successfully locking in business financing. With the appropriate funding, you can elevate your business and realize your entrepreneurial ambitions.

 

In the Canadian business financing landscape, traditional financing options through banks have long been the go-to choice for many businesses. However, alternative financing solutions such as receivable and asset-based lending have gained traction, offering greater accessibility, flexibility, and speed.

 

Small businesses, and for that matter firms of all sizes, need proper financing - Want some help in determining what your financial statements say about your financing needs and how much cash is required, as well as identifying what solutions are available? Most businesses almost always require capital.

The decision between conventional financing and alternative options hinges on a business's unique situation, objectives, and preferences. Businesses can identify the best-fit funding sources for their unique needs, fostering growth and success, by meticulously examining eligibility, funding speed, costs, and adaptability.

To help assess the appropriateness of various financing alternatives for specific business needs, seek advice from financial professionals or experts.

Speak to 7 Park Avenue Financial, a  trusted, credible and experienced Canadian business financing advisor who can assist you with positive cash flow and overall business funding needs for more cash for your new or established business venture.

 

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION  

 

What is a cash flow statement?

A cash flow statement tells you how much money enters and leaves your business in a given period. The cash-flow statement, a component of a business's financial statements, shows the changes in a business's available cash over time. A company's cash flow statement will highlight the business's operating cash flow. It is one of the three sections of a firm's financial statement.

 

 

 

 What is the main difference between traditional financing and alternative financing solutions?  

 

 

 

Traditional financing typically involves banks and includes options such as business loans and lines of credit. Alternative financing solutions, on the other hand, offer non-traditional avenues like receivable financing and asset-based lending, which may be more accessible, flexible, or tailored to specific business needs.

 

Are alternative financing solutions only suitable for small businesses or startups?

 

While alternative financing solutions can benefit small businesses and startups, they are not limited to these categories. Businesses of various sizes can explore alternative financing options based on their specific requirements, including those related to cash flow management, asset utilization, or growth opportunities.

 

How does receivable financing (factoring) work, and what are its benefits?

 

 Receivable financing, or factoring, involves selling outstanding invoices to a third-party financing company at a discounted rate in exchange for immediate cash. The benefits include improved cash flow, accelerated revenue cycles, reduced credit risk, and the ability to focus on core business operations rather than collections.

 

What assets can be used for asset-based lending, and what are the advantages?

 

 Asset-based lending allows businesses to use assets such as accounts receivable, inventory, or equipment as collateral for obtaining a loan. The advantages include increased borrowing capacity, more flexible terms, improved liquidity, and the potential to unlock the value of remaining idle assets.

 

Is crowdfunding a viable option for business financing in Canada? 

 

Yes, crowdfunding has gained traction as a viable option for business financing in Canada. It involves raising funds from a large number of individuals through online platforms. Crowdfunding can benefit startups or businesses with unique products or services, as it provides capital, helps build a customer base, and creates brand awareness.

 

 What are Factors to Consider When Choosing a Financing Source

 

When deciding on a financing source for your business, it's important to consider various factors that can impact your decision. Some key considerations include the amount of funding required, the purpose of the funds, the repayment terms, the interest rates, and the eligibility requirements. It's also crucial to assess the potential impact on ownership and control of your business. Each financing option has advantages and disadvantages, so it's important to evaluate them carefully and choose the one that aligns with your business goals and needs.

 

 What Are Some Tips for Successfully Securing Business Financing

 

1. To access debt financing, develop a comprehensive business plan: Highlight your industry knowledge, market understanding, and growth potential with a robust business plan detailing your objectives, strategies, and financial forecasts.

2. Cultivate connections with financiers: Increase funding opportunities by networking and fostering relationships in the financial sector. Engage in industry events, join professional groups, and gain insights from seasoned entrepreneurs.

3. Boost your credit score: Enhancing your credit score can greatly increase your chances of securing funding. Regular bill payments, minimizing outstanding debts, and correcting credit report errors can help.

4. Be ready for due diligence: Maintain readiness for rigorous assessments by lenders and investors. Keeping all financial, business, and legal documents well-organized can expedite this process.

5. Engage financial professionals: Contemplate seeking help from financial advisors, accountants, or attorneys who are experts in business financing. They can offer invaluable advice and help simplify the funding process's intricacies.

 

 

 What is Private Equity

 

Private equity, a form of venture capital, involves an investor acquiring an ownership stake in your company in exchange for money. These investors aren't interested in running your business; they focus on companies on the verge of profitability, which possess robust business plans and solid ownership structures.

They require precise financial statements and projections to evaluate potential business development opportunities. This type of investor is often equated with terms like equity financing or equity funding.

This option could be suitable for entrepreneurs who have conducted thorough industry research, are prepared for an infusion of capital, desire the perks of an expanded network, and are searching for financial and resource support. They have a range of methods to finance your business, including repayable loans, debt financing, debt programs, equity financing, or providing capital in return for stock or ownership, among others.

 

 

What Are Angel Investors

 

An angel investor invests in early-stage businesses rather than offering a debt capital solution. They comprehend the inherent risks, are adept at evaluating potential, and can offer valuable advice and networking opportunities to augment your success, considering your investment in the business.

Your potential for high growth is intrinsically linked to your network, execution ability, and comprehension of your circumstances. Angel investors excel in partnering with you in these domains. They supply resources, capital, research, industry connections, programs, services, financing, investment, and focus, among other things, to aid you in expanding your initiative or accelerating your growth.

Consider seeking a local angel investors club or organization for assistance. Engage with successful entrepreneurs, inquire about their early stages, and find out who they might know in the angel investor community or those who invest their funds in businesses.

 

 

 

What is a VC / VENTURE CAPITAL INVESTOR

 

Venture capitalists use other people's money (sometimes their own) to invest in early-stage businesses through common or preferred stock. Typically, they don't engage much with very early-stage (angel) investments; they focus on firms poised for high growth or potential.

They anticipate acquiring an ownership stake in the company in return for their investment. They are interested in profits, understanding that these might come later. They desire to contribute to the company's success, although they don't intend to operate the business.

Angel investors might be better suited to funding opportunities for small businesses, whereas venture capitalists tend to invest in startup companies. Conversely, a venture capital investment could be more appropriate for later-stage or high-growth companies. Most small business owners do not meet the criteria for venture capital funding.

 

 

 

Click here for the business finance track record of 7 Park Avenue Financial

Get Your Business to the Next Level: Exploring Different Financing and Funding Options

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS!

From Commercial Loans to Government Funding: A Comprehensive Guide to Business Financing

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

 

Innovative Business Loans and Funding Solutions to Drive Your Company Forward

 

Business financing needs, aka ' business loans'!  in Canada might be requiring you to ' test the water ‘. But the question that begs to be asked by small business owners  is :

"What amount of capital do you require for your company and, equally important, what is the desired or best funding solution".

 

INTRODUCTION

 

Business owners know that cash flow and the right financing solutions are the lifeblood of a business - from startups to established businesses any company that wants to both expand or generate additional cash flows for funding day-to-day operations - Numerous financing options, both traditional and alternative in nature are available for the business loans and funding you need to succeed.

 

Small and medium-sized companies rarely qualify for the venture capital sought by major tech firms, etc - they want ' main street' /'real world' lending solutions. Let's dig in!

 

 

 

COMMERCIAL LOANS FOR BUSINESSES 

 

Most commercial loans are for established businesses that have been in business for years - startup financing is always a challenge in Canada.  Whether it is a startup or a business already doing well financing can help grow and expand while maintaining efficient day-to-day operations.

A commercial loan can be secured or unsecured - secured loans are asset and collateral-based - assets financing includes accounts receivable, inventory, fixed assets and technology,  rolling stock, and real estate.

 

Unsecured loans tend to be cash flow based and can come in the form of unsecured bank lines of credit or cash flow mezzanine type financing solutions that focus on the quality of the cash flows of the business to meet debt obligations.

 

ELIGIBILITY REQUIREMENTS FOR COMMERCIAL BUSINESS FINANCING

 

Business loan requirements will typically include basic information on the business including financing statements and cash flow projections - Often a business plan is required and in almost all instances will help with funding approval. 7 Park Avenue Financial prepares business plans for clients that meet and exceed bank and commercial lender requirements.

 

 

A full-scale business plan might well be required for larger financing - we're typically talking 1 Million ++ $, and that includes solid executive summaries, cash flow forecasts, etc. But in the ' SME “market (small to medium enterprise) (where a lot of action takes place!) that's definitely not necessarily the case.

 

 

We'll point out though that any small business owner/financial mgr in the SME environment who can't provide basic info such as financial statements,  owner info, background story, etc is somewhat doomed to failure in achieving their company financing goals. In some cases, a third-party business financing advisor/consultant might be the best person to move your financing needs forward.

 

Borrowing limits will always be based on the type of financing needed as well as interest rates commensurate with the credit quality of the business.

 

Keep in mind also that whether it’s a small or large amount of due diligence you will always be required to submit a proper application and relevant backup info - For example - aged receivables, payables, articles of incorporation., tax obligations, etc. 

 

The personal credit history of borrowers will always come up in most commercial loan applications, and in small business financing in Canada, the personal credit of owners is closely tied to how they run their companies in the eyes of lenders. Credit bureau scores can be easily checked at firms such as Equifax and a good minimum score tends to be in the 650 range. 

 

 

WHAT ARE THE FINANCING NEEDS OF CANADIAN BUSINESS

 

 

Many companies in Canada are always working on various .. let us call them ' projects ' which require business capital. The challenge is what type of debt capital or cash flow finance will assist them with any particular project. In some cases, it might simply mean complementary funding to existing loans or business credit lines.

 

Although there seem to be more ' service ' oriented companies than ever before thousands of firms continue to have the basic needs revolving around the investment in receivables and inventory they make in funning and growing their business.  Conservation of cash is always important when it comes to running day-to-day operations while keeping long-term goals in mind.

 

 

BOOST BUSINESS GROWTH WITH THE RIGHT FINANCING STRATEGY 

 

 

Many firms like yours might work hard to obtain larger new orders or contracts in perhaps new geographic or product and service segments of your business. Getting those large new orders/contracts places a strain on day-to-day working capital and cash flow needs, so solutions such as purchase order financing or a short-term working capital loan might well be the solution.

 

Other needs for capital might revolve around basic sales and marketing dollars or the ability to purchase additional products at a significant discount when the opportunity arises. We've met many business owners of the years here at 7 PARK AVENUE FINANCIAL who shared with us stories about being able to pay C.O.D. for an order, thereby allowing them to negotiate up to a 5% discount on that prepayment.

 

Let's not forget that your suppliers carry inventory and a/r investments also!    What will always distinguish a company focused on borrowing capital is its ability to show a well-experienced management team and the ability to produce financial reporting as required by any bank or commercial lender.

 

Always ensure you understand the implications that come with new financing when you already have a senior lender in place. The best solution is of course to have a proper ' cobbled together ' suite of finance solutions that bring the desired level of capital and flexibility.

 

AVOID EQUITY DILUTION IF POSSIBLE

 

Debt financing and cash flow financing are non-dilutive in nature - Don't forget that any new owner/equity capital has the effect of diluting ownership - so although debt and cash flow solutions might seem expensive they are always cheaper than giving up equity ownership via the dilution process.

 

Naturally new capital can come in the form of new owner equity (not what we are talking about here today) or debt and asset monetization. ( That's what we're talking about today ), namely true borrowing and working capital solutions.

 

 

DON'T LET LACK OF FUNDING HOLD YOU BACK - UNCOVERING INNOVATIVE FINANCING SOLUTIONS

 

ALTERNATIVE LENDING SOLUTIONS

 

Traditional loans from financial institutions such as banks aren't always accessible by many businesses - As well banks have lengthy application processes and much more strict criteria for loan approval and eligibility. Alternative Financing solutions are available to the business owner for :

 

Refinancing

Cash Flow Moneitzation

Asset and technology purchases

Business expansion

 

What you are starting a business or focused on improving cash flow solid financing solutions can help you stay ahead of the game, grow sales, and be able to meet business needs around unexpected expenses.

 

What then are the basic financial solutions available in SME COMMERCIAL FINANCE? They typically include the following, and all come with a different interest rate and repayment structure -

 

A/R Financing - (includes factoring, Confidential Receivable Financing)

 

Inventory Finance

 

Bank credit lines/term loans

 

Non-bank full business credit lines – ‘ ABL’ loans

 

Equipment Finance/sale-leasebacks - equipment loans

 

GOVERNMENT LOANS AND GRANTS

 

Government of Canada Guaranteed Small Business Loan Program (this just in! New limit is $1,000,000.00) - Probably the best government-sponsored financing program - Many business owners/ entrepreneurs quite rightly look to the government of Canada for financing programs in the Small business sector. No secret that economists tell us that the 'SME' sector in fact drives the Canadian economy.

 

The Canada Small Business Financing Program - ' CSBFP' is a great start for those looking for capital. Although not as robust an offering as its U.S.  SBA /  small business administration counterpart, the 'SBA' program ( what's with all these acronyms?!) is a viable way to start and grow a business. Monthly payments are made under a term loan structure and a limited personal guarantee is required.

 

Of interest is the fact that many franchises are financed through this program, it's close to a perfect fit for that!

 

Government business loans are available to Canadian business owners who are looking for financing. Although the Canadian government has many different programs in place to help all businesses, they tend to focus on providing small business loans the most. After all, keeping small to medium-sized businesses afloat helps add to local economies and makes the country a more diverse and interesting place to live.

 

Government small business loans may be a viable option for Canadian entrepreneurs looking to grow their businesses. Here is some information about Canada’s loan program to help finance small businesses, known as the Canada Small Business Financing Program or CSBFP. Eligibility is for that firm with under 10 M in sales, and even proprietorships and partnerships can apply. The primary assets financed under the program include leaseholds and equipment and even real estate. The program is often, as we noted in the case of franchises, used to purchase an existing business from a seller or franchisor.

 

Many clients we talk to here at 7 Park Avenue Financial are misinformed about what can or cannot be financed under the program - etc.

 

 

SR&ED Loans- Refundable tax credit financing

 

Royalty Finance

 

Franchise Loans

 

Working Capital Loans - Merchant Cash Advance

 

Unsecured cash flow loans

 

 

Our experience tells us that timelines often drive the financing need, with, unfortunately, many clients demonstrating reactive as opposed to proactive financing searches. Some transactions definitely require more time than others to successfully be completed, and unfortunately, some firms don't have the financial resources to control their destinies! Aka ' running out of cash!

 

Can we provide a guarantee around your business financing needs? Yes, we can! We guarantee that your financing search may well become time-consuming and frustrating and challenging! 

 

CONCLUSION - BUSINESS FINANCING, LOANS FUNDING - A ROADMAP TO FINANCIAL STABILITY AND GROWTH

 

Looking for the right financing options to help your business survive.. and grow?! Whether it's a commercial loan from traditional financiers or an alternative lending and funding option it's important to be well-informed about your options. Get the right business advice about your financing needs and get ready to watch your business grow

 

When it comes to debt and working capital financing call  7 Park Avenue Financial,  a trusted, credible, and experienced Canadian business financing advisor who can assist you with your business finance needs.

 

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

 

What are the main types of financing for businesses?

 

   The main types of financing for a business include:

 

Business credit cards and working capital loans / online lenders

Term loans/installment loans

Government Loans

Lines of Credit

Commercial mortgages

Equipment financing /leasing

Business owners own financial resources 

 

What is the difference between secured and unsecured business loans?  

 

Secured business loans such as business term loans are backed by collateral, such as business assets such as real estate, vehicles, or machinery. Personal assets are sometimes used as collateral for bank-type financing. In contrast, unsecured business loans do not require collateral and are based on the borrower's creditworthiness and when used as a  business line of credit the borrower will pay interest only on funds used. Because secured loans provide the lender with collateral in case the borrower defaults, they typically have lower interest rates and longer repayment terms than unsecured loans.

 

 

 What types of funding solutions are available for small businesses in Canada? 

In Canada, small businesses have access to a variety of funding solutions at competitive interest rates, including commercial loans, business loans, alternative lending solutions, and funding options for specific business needs such as business expansion, starting a business, improving cash flow, and property finance. Each funding solution has its own eligibility criteria, borrowing limits, and interest rates, so it's important to do research to find the right fit for your business. Government small business loans work well for a number of startup and early-stage financing needs and are available from banks and credit unions. The maximum loan amount under the government loan program is 1.1 Million dollars.

 

 

How can I apply for a business loan? 

To apply for a business loan for business finances the business owner will need to provide a detailed business plan, financial statements, and cash flow projections. The interest rate on a business loan is typically based on the Bank of Canada policy rate, plus an additional amount that reflects the level of risk being taken by the lender. It's important to do your research on different lenders and their application processes to find the right fit for your business needs.  Minimum personal credit score requirements in the 650  range is required on most business loans ( as well as personal loans )  - Timing on receipt of loan funds should always be considered as alternative financing typically delivers a faster financial solution.

Make Invoice Factoring Loans And Asset Based Lending Work ! Looking For A Business Credit Line Solution?

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You Are Looking For Canadian Business Financing!

Unpacking the Differences:  Factoring vs. Asset-Based Lending

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

        Financing & Cash flow are the  biggest issues facing businesses today 

               Unaware / Dissatisfied with your financing options?

Call Now!  - Direct Line  - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

Email  - sprokop@7parkavenuefinancial.com

 

Asset-Based Lending and Invoice Factoring: Alternative Financing Options Explained

 

Invoice factoring loans are one area of business finance that has slowed the growth of traditional financing via banks in Canada.

 

It's no secret that asset-based lending is on the rise, while not that long ago, we can vouch, that alternative financing was pretty well unheard of. Industry stats both in the U.S.  as well as Canada indicate more and more companies are turning to asset-based lending solutions.

 

A big challenge of any business is the cash flow challenges in times of economic uncertainty and when a business is focused on growing and expanding market share - traditional bank financing may not be available during times like this - that is when alternative financing options such as receivable financing/ factoring, and asset-based lending tend to be a popular solution - The real challenge is knowing which finance option is best for your business.

So why have asset-based financing solutions become one of the most popular financing methods for your company's working capital and cash flow needs?

Asset-based finance solutions and factoring work for a straightforward reason - they monetize one of the essential assets in your business, letting accounts receivable act as security.

 

 

WHAT IS INVOICE FACTORING? 

 

Invoice factoring is a  business financing option which allows businesses to finance outstanding invoices to a third-party commercial finance company in exchange for immediate cash. In traditional invoice finance factoring services, the financing company assumes management and collection of the receivable - The factoring agreement specifies the invoices are  ' sold ' to the fiance company - in bank financing, invoices are assigned to the bank, typically under a general security agreement.

 

Key benefits of factoring invoices include the ability to access cash immediately without any debt coming onto the balance sheet - the company is simply monetizing a balance sheet asset - accounts receivables.

 

Small and medium-sized businesses that need working capital to fund day-to-day expenses and finance growth use factoring, which is not debt financing on the balance sheet.

 

 

THE INVOICE FACTORING PROCESS 

New clients here at 7 Park Avenue Financial always want to know how these 'loans work.  First of all, it's not a loan per se. It's simply a method of selling and cash-flowing your receivables as your generate revenues. Cash advanced on this type of financing is typically in the  80-90 % range and it's at the business owner's option to cash flow some or all of your a/r.

 

 

 

WHAT DOES FACTORING COST? 
 

Confusion exists if only for the terminology commercial lenders and customers use around describing the cost of this financing.

 

That's because this finance method is costed as a ' fee ', not an interest rate. Factoring fees are typically between .75 - 1.25 %, so if your firm has good margins and a reasonable turnover in receivables you are an excellent candidate for factoring loans.

 

FACTORS INFLUENCING PRICING

Other factors that influence your overall cost include :

Size of your facility,

General creditworthiness of your customer base

The amount of time you use the funds for is probably ultimately the largest cost aspect of the financing.  Good asset turnover and lower days sales outstanding lower financing costs!

 

While bank business credit lines are the lowest cost in Canada it's no secret that thousands of businesses simply can't access all or part of the business financing they require.

 

 

IS CONFIDENTIAL RECEIVABLE FINANCING THE BEST FACTORING SOLUTION? 

At 7 Park Avenue Financial, we strongly recommend Confidential Receivable Financing facilities. They allow you to bill and collect your own accounts, generating the cash flow you need to run and grow your business.

A/R financing collateralizes company assets such as receivables, allowing you to finance the other parts of your business, such as inventory, equipment, real estate, etc.

For smaller to medium-sized firms that have exhausted forms of financing such as business credit cards, friends and family loans, collapsing personal investments asset-based lending via a business factoring loan is a logical step to financing operations and growth.

 

  

 

WHAT IS ASSET BASED LENDING?  

 

Asset based lending is a business finance option that allows a business to use the physical assets of the business as a loan or line of credit. Assets financing under this type of facility include combinations of accounts receivable, fixed assets and equipment, inventories, and in some cases real estate.

 

Key benefits of this type of loan or line of credit include the ability to be flexible in drawing down funds as the business needs them and scale finance as sales and assets grow. Assets financing under the facility remain in the ownership of the company. Asset-based lenders are experienced in assessing values and advance rates on each asset category, ie receivables.

 

 WHAT IS THE DIFFERENCE BETWEEN INVOICE FACTORING AND ASSET BASED LENDING? 

 

The key difference between factoring and asset based lending lines of credit is the paperwork around the ownership of the invoices - Under a factoring agreement invoices are ' sold ' to the finance company. In contrast, in asset-based lending assets are secured as collateral for the financing.

 

In traditional factoring the factoring company is involved in the collection of invoices, but in asset based lending, businesses retain ownership and the customer relationship around collections.  As we have noted companies choosing  Confidential invoice financing are in fact allowed to bill and collect their own invoices while still enjoying the benefits of immediate cash access.

 

The timing around financing costs is also another difference - In invoice factoring the financing company purchase invoices at a discount. In contrast, interest rates/ financing costs do not start until facilities are drawn down on and used.

 

  WHICH FINANCE OPTION IS RIGHT FOR YOUR BUSINESS? 

 sE

Several factors will define whether  your firm will best benefit from  factoring or a full asset based lending solution - Those factors are:

 

Type of industry

Cash flow needs,

Growth goals

 

Factoring is best suited for businesses with  higher  volumes of invoices and the need for the firm to access immediate cash to cover business expenses and funding day-to-day operations - The ability to finance working capital investment in accounts receivable is a key factor

 

Asset based lending solutions such as term loans or business lines of credit are best suited for companies needing a full business line of credit that funds accounts receivable, inventories and other business assets. Companies that cannot access all the financing they need from traditional bank financing solutions are solid candidates for asset-based lines of credit.

 

Both solutions help companies with cash flow problems

 

  

KEY TAKEAWAYS: INVOICE FACTORING ASSET BASED LENDING 

 

Invoice factoring is a solid alternative financing option for small businesses needing immediate cash

Invoice factoring is the sale and financing of outstanding invoices st third-party factoring companies

Asset based loans and lines of credit is a full-service financing facility which funds business assets and combines them into one facility

Both solutions, ie  factoring and asset-based credit lines provide fast access to cash once facilities are improved and set up

A company will determine whether it needs invoice factoring or asset based loan solutions based on cash flow needs and the overall  creditworthiness of the business

 

  

 

 CONCLUSION - ASSET BASED LENDING VS. FACTORING  

 

Both invoice factoring financing and asset based lending are creative and alternative finance options that can help a business grow via access to capital around the cash flow needs of the business.

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor with a track record of success.

 

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK MORE INFORMATION

 

 

Do I lose ownership of my invoices with invoice factoring? 

Yes, invoice factoring involves the selling of outstanding invoices to third-party factoring firms to obtain funds via a cash advance prior to invoice collection - in traditional notification factoring the finance company manages collection and payments.

  

 Does invoice factoring affect my customer relationships?  

In invoice factoring the finance company has contact with customers in the collection relationship, while an asset based lending business credit line allows the company to bill and collect its own receivables as well as manage collections. customers.

   

What industries are suitable for invoice factoring and asset-based lending?   

Any small or medium-sized business that requires working capital to fund operations and growth will benefit from these facilities' cash flow access. More established companies needing full services credit lines to finance a company's assets such as  a/r, inventory and other assets will typically use an asset-based credit line.

 

    

Is factoring considered asset based lending?    

 

Yes, factoring is often considered a type of asset-based lending because it involves selling unpaid invoices to a  commercial lender, who then provides funding based on the value of those assets. Unlike traditional loans, factoring is sometimes non-recourse, meaning that the lender assumes the risk of non-payment by the debtor. The amount of funding available through factoring depends on the borrowing base, which is the total value of the assets/invoices being factored.

Factoring is often used by manufacturing companies and other businesses with rapid expansion and core operations that require additional money to pay invoices and support important differences in payment. The annual percentage rate and additional fees associated with factoring are typically higher than those of traditional term loans, and lenders view factoring from their perspective of collecting payments on the invoice assets purchased. Overall, factoring is a valuable financing option for businesses that require immediate payment and can benefit from the value of funding unpaid invoices.

 

 

Click here for the business finance track record of 7 Park Avenue Financial