YOUR COMPANY IS LOOKING FOR BUSINESS FINANCE!
ASSET BASED LENDING & ASSET BASED LOAN SOLUTIONS
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business 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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Unleash your business's hidden potential with an Asset Based Line of Credit, a game-changing financial tool that turns your assets into immediate working capital.
Struggling with cash flow? Transform your assets into instant capital without sacrificing ownership.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer the Asset Based Line Of Credit and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Asset Based Line of Credit: Business Credit Lines
Asset-based lenders provide financing solutions based on the value of a business's assets rather than its credit rating.
Business credit needs sometimes give owners/managers the feeling they need an ‘ engineer ‘for financing, such as an asset-based bank line.
They want financing for now and the future that ‘ fits right ‘ and is chock full of the advantages they need to run and grow their business.
CAN TRADITIONAL BANKING SOLVE ALL YOUR BUSINESS FINANCING NEEDS? ARE ASSET-BASED LOANS THE ALTERNATIVE?
Because some or all of the finance solutions you need aren’t necessarily available from Canadian chartered banks, one alternate solution is the asset-based ‘ ABL ‘ line of credit.
Unlike unsecured loans, which may rely heavily on the borrower's credit score, asset-based loans offer more flexibility and potentially higher loan amounts because they are backed by collateral.
It’s one solution that puts your firm, the borrower, in the driver’s seat regarding unlimited capital relative to your growth needs. That’s a radical statement of sorts, so let’s dig in.
ALTERNATIVE FINANCING / ASSET BASED FINANCING COMPETES WITH TRADITIONAL BANKING
Many clients we meet with initially are reluctant to step ‘ outside the box ‘ when it comes to what they consider ‘ traditional ‘working capital and cash flow needs.
However, in case you haven’t noticed, times are changing! Businesses might choose asset-based lending over traditional banking options because it allows them to unlock capital based on their assets rather than solely on cash flow metrics.
Asset financing solutions grew dramatically in the United States, and this method of financing surpasses bank credit in terms of loan volume!
IS TRADITIONAL FINANCING ACCESS LIMITED GROWTH
While traditional bank lines come with the lowest cost in Canadian business financing, they can be limiting when it comes to the limits the bank might place on leverage - or, in other cases, being unable to address the seasonality and bulges in your business.
The terms of an asset-based loan depend on the type of collateral offered, with lenders favouring highly liquid assets for better loan conditions.
REQUIREMENTS TO ACCESS AN ABL ASSET BASED LINES OF CREDIT
The asset-based non-bank ‘ ABL ‘ credit lines come with some obligations for your firm. One is the need to report more often, always monthly, but sometimes even more on your business’s assets.
Reporting on your company's assets, such as eligible accounts receivable and inventory, is crucial for accessing flexible financing alternatives.
Typically, that’s simply aged schedules of receivables, inventory, and fixed assets. We would submit that if your company didn’t produce these efficiently on an ongoing basis, other problems probably lurked on your financials.
EVERY COMMERCIAL BUSINESS NEDS A BUSINESS LINE OF CREDIT
The revolving credit facilities you need are often the most sought-after part of the Canadian business financing puzzle.
If structured and managed correctly, the asset-based credit line has the potential to solve all your liquidity problems. Including commercial real estate in your line of credit can enhance liquidity by providing a secondary asset. However, it typically has a lower loan-to-value ratio than more liquid securities.
ENTER THE ABL COMMERCIAL FINANCE SOLUTION!
Companies with higher debt and balance sheet ratios that don’t meet bank requirements but still have current assets (Accounts Receivable and inventory) have just discovered that they can access all the liquidity they need via a revolving line, albeit often at a higher cost.
Businesses can secure flexible financing solutions by leveraging financial and physical assets such as inventory, machinery, and real estate.
Real estate equity can also be included in the same line of credit - it’s all about assets on the balance sheet!
EXPLAINING THE ASSET BASED LINE OF CREDIT VERSUS TRADITIONAL BANKING
When we explain the ABL financing asset-based solution to clients, we focus on two ways to look at a revolving credit line.
The banks focus on cash flow, historical, present, and future. The asset-based lender takes an ' alternate' approach, instead focusing on your business's hard assets and monetizing them into one revolving facility.
These types of facilities are also widely used in buyouts, acquisitions, and general business refinancing. Although interest rates are higher on ABL loans, they provide access to capital not otherwise available in traditional financing.
KEY TAKEAWAYS
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Borrowing base calculation: Understanding how lenders determine your credit limit based on eligible assets.
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Collateral management: Effectively tracking and reporting on assets used as security
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Working capital optimization: Utilizing the line of credit to improve cash flow and operational efficiency
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Asset valuation methods: Grasping the techniques used to assess the value of various asset types
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Covenant compliance: Maintaining financial ratios and reporting requirements to stay in good standing
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Pledged asset management: Recognizing the impact of the liquidity of pledged assets on the loan-to-value ratio and how different types of assets, such as marketable securities and real estate, affect the percentage of the asset's value that can be used for securing loans
CONCLUSION
Asset-based lending works! By leveraging assets such as accounts receivable, inventory, and real estate, businesses can unlock capital from their assets, enhancing their company's cash flow.
If you wish to explore the somewhat ‘ radical ‘ power of the asset-based bank line and feel that you need more ‘ business credit ‘ and flexible financing, seek out and speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing needs.
FAQ
How does an Asset Based Line of Credit improve cash flow?
An Asset-Based Line of Credit improves cash flow by allowing businesses to borrow against their existing assets and provide immediate access to working capital without waiting for customer payments or inventory to be sold.
What types of assets can be used to secure an Asset-Based Line of Credit?
Businesses can typically use accounts receivable, inventory, equipment, and sometimes real estate to secure an Asset-Based Line of Credit, allowing for a more comprehensive borrowing base.
Can an Asset-Based Line of Credit help my business during seasonal fluctuations?
Yes, an Asset-Based Line of Credit offers the flexibility to draw funds as needed, making it ideal for businesses with seasonal fluctuations in revenue or inventory levels.
Is an asset-based line of credit suitable for businesses in the growth phase?
Absolutely. As your business grows and acquires more substantial assets while growing sales, your borrowing capacity increases automatically with asset-based lenders, providing scalable financing that adapts to your company’s expansion.
How does an Asset Based Line of Credit compare to traditional term loans?
Unlike term loans with fixed repayment schedules, an Asset-Based Line of Credit offers revolving credit that can be drawn and repaid as needed. This provides greater flexibility via additional working capital and potentially lower overall borrowing costs.
What are the typical fees associated with an Asset Based Line of Credit?
Asset-based Lines of credit may include origination fees, unused line fees, audit fees, and collateral monitoring fees. The specific fee structure varies by lender and the size of the credit facility.
How frequently are borrowing base reports required?
Borrowing base reports are typically required monthly, but some lenders may request weekly or even daily reporting for higher-risk or more extensive credit facilities.
Can startups qualify for an Asset-Based Line of Credit?
While more challenging, some startups may qualify for an Asset-Based Line of Credit if they have significant assets, can demonstrate strong revenue potential, or have valuable contracts in place.
What happens if the value of my assets decreases?
If asset values decline, your available credit limit may be reduced. This is why lenders regularly monitor collateral and may require periodic asset revaluations.
Are there industry-specific Asset-Based Lines of Credit?
Yes, some lenders offer specialized Lines of Credit tailored to specific industries, such as manufacturing, technology, or healthcare, with terms that account for unique asset types and business cycles.
How does an Asset Based Line of Credit differ from factoring?
An Asset-Based Line of Credit provides broader financing options by leveraging multiple asset types while factoring focuses solely on selling accounts receivable. ABLs often offer lower costs and don’t involve transferring customer relationships to the lender.
What role does technology play in managing an Asset Based Line of Credit?
Advanced software and fintech solutions now enable real-time asset tracking, automated borrowing base calculations, and seamless integration with accounting systems, streamlining the management of Asset Based Lines of Credit and improving transparency for borrowers and lenders.
How can an Asset-Based Line of Credit support international business expansion?
Asset-based Lines of Credit can facilitate international growth by providing funding for export activities, financing inventory in foreign warehouses, and leveraging overseas receivables, often with specialized structures to mitigate currency and country risks.
