You Are Looking for ABL Financing – Asset Financing Works!
Asset Based Lending Finance Solutions In Canada For Growth Finance Funding
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
Unaware / Dissatisfied with your financing options?
CONTACT US ! - Direct Line - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs.
Email - sprokop@7parkavenuefinancial.com
Are you a business owner struggling to secure financing? Unlock the potential of your assets with asset-based lenders.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ASSET BASED LENDING solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
Fueling Growth: How Asset-Based Lenders Drive Business Expansion
INTRODUCTION
'Confidence in good sense' - that’s one definition of the word trusted. And we think that’s a great way of thinking about ABL financing and asset finance in Canada. So ABL... What is it? It stands for asset based lending, and we'll dig into why an asset-based loan via asset based lenders will work for your business.
Asset-based lending is a Canadian business financing solution that works for businesses aiming to leverage their sales and assets to secure funding.
ABL lenders offer a compelling alternative to traditional bank financing. Unlike conventional loans from financial institutions such as banks that rely heavily on creditworthiness, cash flow generation, profits and clean balance sheets the asset based loan focuses on the tangible assets a business owns, such as inventory, equipment, or accounts receivable as well as physical assets such as commercial real estate.
That makes it an attractive option for companies with substantial assets but limited access to traditional financing.
WHY ASSET BASED LENDING IS THE OPTIMAL WORKING CAPITAL SOLUTION FOR CANADIAN BUSINESSES
ABL Finance is a revolving line of credit facility whereby your assets are secured by the facility you borrow against all those assets daily. ABL can, almost always, provide more funding than a conventional facility that might be associated with Canadian business bank financing.
WHY ASSET BASED LENDING WORKS
But, and it's a big but, as opposed to bank financing via a Canadian chartered bank facility, you are allowed to borrow against the real-world maximum liquidity of those assets. Typical assets secured under an ABL financing facility are receivables, inventory, fixed assets, and on occasion, real estate if that also fits into your asset equation.
WHY IS ABL FINANCING UNIQUE?
Asset-based lending's uniqueness is simply that the majority of these facilities are offered by what we call 'non-banks' - given that the majority of Canadian business owners and financial managers associated 'borrowing' and lines of credit with Canadian chartered banks.
Instead, the ABL lenders tend to be independent finance firms, some of whom are U.S. based but doing business here, who focus and have tremendous expertise in the one thing you cherish most - your business assets! It's important to understand the ' abl facility vs term loan ' concept as ABL credit lines are not usually structured as a term loan .
THE VERSATILITY OF ASSET BASED LOANS
So, where does the versatility come from then? That’s the great part of a line of credit via asset finance strategy. It's all about what we call 'maximization' (is that really a word?). In ABL financing, usually, 90% of accounts receivable become an immediate borrowing base, and inventory tends to be financed in the 30 -70% range. That's effective balance sheet financing.
BUT WAIT .. THERE'S MORE!
In case you haven’t figured it out yet (we’re sure you have), that’s about 30-70% more than you probably were getting before.
And, under the concept of true asset finance, the appraised or market value of your unencumbered fixed assets also now becomes part of your daily borrowing ability for cash flow and working capital as you need it.
Tell us that isn’t versatility when it comes to solutions such as invoice finance asset-based lending.
Also, your lender may increase your facility as your sales and assets grow almost automatically. The perception that asset-based lending is a financing solution for companies in poor financial health has long since gone away - and by the way, some of the largest and most successful companies in Canada use asset finance based lending.
OVERCOMING BANK CREDIT REQUIREMENTS VIA ASSET FINANCE BASED LENDING
Because ABL commercial finance increases your ability to borrow for liquidity purposes, it allows you to put aside the challenges of meeting qualifications for chartered bank lines of credit - all those things your banker loved to talk about - leverage, cash flow coverage, minimum debt to equity ratios and on it goes... you know the drill. In asset financing due diligence focuses on asset value and asset turnover.
Traditional bank financing in Canada is heavily focused on the profit and cash flow of a business.
Traditional lenders create a set of metrics around what is known as covenant-based financing that creates rules around working capital, net worth, debt and equity, and interest coverage. Many companies in the SME/SMB economy in Canada can't meet those requirements.
Your business might also have seasonality or cyclicality attached to its business model. Asset finance allows your first asses and sales to whether any economic downturn - a term often used in ABL is that it is in fact ' patient financing'.
So, is your firm eligible? It is if you meet the sole criteria - you have assets! The beauty of asset based financing is that it works for small firms, major corporations, firms with financial challenges, and those enjoying the best of all worlds, high growth and profits and a need for constant new working capital.
ASSET BASED LENDING BANKS IN CANADA
Some Canadian business banks offer ABL financing but this has historically been a small part of the commercial bank offering in Canada - Minimum transaction sizes are often in the 5 M $ range and are often outside the needs of the typical small and middle-market borrower. Some U.S. companies lend in Canada under the ABL model and many of these firms have come and gone over the last decade.
KEY TAKEAWAYS
Collateral: Assets pledged by the borrower to secure the loan
Loan-to-Value Ratio: The ratio of the loan amount to the value of the collateral, determining the risk for the lender.
Working Capital: Funds available for day-to-day operations, are crucial for business sustainability.
Revolving Credit Facility: A flexible line of credit that allows borrowers to draw funds as needed, up to a predetermined limit.
Credit Risk Assessment: Evaluation of the borrower's creditworthiness and the risk associated with lending, influencing loan terms and interest rates.
CONCLUSION: ABL FINANCING
So, got what it takes? Asset-Based Lending/Loan Financing is a Secured Loan to Help You Grow Your Business. If you need increasing, flexible, and higher lines of borrowing power.
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who will ensure you have funding solutions via asset-based lending that meets your firm's unique survival, growth, and financing needs.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is asset based lending?
Asset based lending is financing for a business that is secured by collateral. Typical asset based credit lines is secured via receivables, fixed assets, and any property that the company might own. ' ABL ' is commercial financing, not consumer finance, and is also called asset-based finance.
What are the key benefits of asset based lending?
An asset-based loan allows your business to use your business's assets to obtain working capital. That capital allows you to consider growth objections and may also be used to fund an acquisition or assist in a turnaround and restructuring of your business. Unlike traditional bank financing, these loans are not ratio and covenant, and external collateral focused. Because assets are the lender focus, companies can access more capital than traditional financing.
What are asset based lending interest rates?
Interest rates on asset-based loans depend on the asset quality and asset turnover, the size of a transaction, and your business's overall general credit quality. On balance, asset based lending rates are higher than in traditional finance but offer access to capital other, not obtainable.
What is the difference between ABL Financing and factoring?
Asset based lending invoice finance is a subset of ABL financing. It focuses on funding accounts receivable only - Outstanding invoices are financed immediately as the company generates sales and can be funding on a selective or ' all in ' basis for any invoices less than 90 days. Factoring can be called a subset or part of the asset-based finance industry and focuses solely on accounts receivable financing.
How does asset-based lending impact a company's balance sheet?
Asset-based lending increases both assets and liabilities on a company's balance sheet. The assets used as collateral for the loan are listed as assets, while the loan itself is recorded as a liability.
What are the eligibility criteria for asset-based loans?
Eligibility criteria typically include having valuable assets to serve as collateral, a stable revenue stream, and a good credit history. Lenders may also consider industry risk and the quality of the pledged asset / assets.
Can asset-based lending help businesses during economic downturns?
Yes, asset-based lending can be beneficial during economic downturns because it provides access to liquidity based on the value of assets, even when traditional financing may be scarce. This can help businesses maintain operations and weather financial challenges.
What are the common challenges associated with asset-based lending?
Common challenges include the need for regular asset appraisals, potential limitations on the types of assets accepted as collateral, and the risk of losing assets if the company defaults on the loan.
How do asset-based lenders determine the value of collateral?
Asset-based lenders typically hire appraisers or use their own valuation methods to assess the value of collateral on the company's assets . Factors such as market conditions, asset quality, and depreciation are considered in this process. Fixed asset facility limits may often require an appraisal to ascertain asset lending values for loans.
How do asset-based lenders evaluate the risk associated with lending against assets?
Asset-based lenders assess risk by analyzing the quality and liquidity of the assets being pledged, the borrower's financial stability, and the overall economic environment. They also consider potential scenarios for asset value fluctuations. Man companies can refinance existing debt with ABL solutions.
What are the typical interest rates for asset-based loans?
Interest rates for asset-based loans can vary widely depending on factors such as the borrower's creditworthiness, the quality of the assets used as collateral, and prevailing market rates. Rates may be higher than traditional loans due to the perceived risk. Unsecured loan from banks comes at lower rates - however traditional facility advances from banks have lower margins available for borrowing.
Can asset-based lending help businesses with seasonal fluctuations in cash flow?
Yes, asset-based lending can be particularly useful for businesses with seasonal cash flow fluctuations. By providing financing based on the value of assets, i.e. any pledge asset, businesses can access funds when they need them most, even during low-revenue periods, with emphasis on liquid assets such as a/r and inventory.
