Asset Based Lending Is The Superman of Business Financing In Canada When It Comes To Business Credit Lines
Stan Prokop
Canadian Business Financing | Cash Flow Financing | Asset Based Lending | Equipment Finance | Lender Financing | Purchase Order Financing | Acquisition Financing | SAAS Financing | Acquisition Financing
Debunking The '??There Is Only 1??Business Credit Line ' Myth !
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YOUR COMPANY IS LOOKING FOR ?BUSINESS CREDIT LINES VIA AN ASSET BASED LENDING SOLUTION
FINANCING SOLUTIONS YOU CAN UTILIZE TODAY
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 7 PARK AVENUE FINANCIAL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - [email protected]
7 Park Avenue Financial South Sheridan Executive Centre 2910 South Sheridan Way Oakville, Ontario L6J 7J8
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?Unlock the hidden cash in your business assets - discover the power of Asset Based Lending!
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7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer the Asset Based Lending? solutions and working capital solutions ?– Save time and focus on profits and business opportunities
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7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
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ASSET BASED LENDING SOLUTIONS
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There is one overriding reason why asset-based lending could be your best choice for business financing in Canada.
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Choose asset-based lending to provide your business with financing options that leverage your owned assets rather than just cash flow.
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It’s our version of the ‘Superman’ of business financing solutions! What is that reason? Simply put, it works when other financing opportunities are unavailable or don’t fit your current financial status.
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EVERY INDUSTRY IN CANADA CAN UTILIZE ASSET-BASED LOANS
Asset-based lending works for all firms in all industries and is not dependent on your overall financial performance. Instead, it might be the focus of more traditional-based financing.
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The terms and conditions of an asset-based loan depend significantly on the type and value of the assets pledged as collateral.
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Smaller and mid-sized firms and even larger corporations utilize asset-based loan funding.
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That’s a powerful statement, so let’s examine financing, how it works, and answer some key questions that might help business owners and financial managers determine if this financing is the solution to many or all of their financing challenges.
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WHAT IS ASSET-BASED FINANCING? IT'S ALL ABOUT GREATER CREDIT AVAILABILITY.
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So, let’s backstep a bit. What is the asset-based financing business loan solution?
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Focus on one keyword in that phrase -? assets!? This method of financing allows you to monetize and draw on the market value of a company’s investments in the business.
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Those are very predictable categories: receivables, inventory, physical assets such as equipment, and company-owned commercial real estate. Asset based lending for real estate can often be facilitated via a separate bridge loan.
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If you have one or all of those, your firm is a prime candidate, and flexible financing is on the way.? Facilities are commonly found either in line of credit or via term loans.
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The two most common categories are inventory financing and a/r financing. Equipment financing is often handled separately via a lease financing solution for firms requiring upgraded or new assets and technology.
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This lending originated in the United States via asset-based lending banks and is becoming increasingly popular in Canadian business financing . Financing the balance sheet is a solid alternative via abl loans when bank business credit can’t meet your needs.
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Asset-based lending can enhance a company's cash flow by leveraging assets such as accounts receivable and inventory to secure loans.
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ACCOUNTS RECEIVABLE FACTORING IS JUST ONE OF THE TYPES OF ASSET-BASED FINANCING
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In some cases, this method of financing is confused with a factoring line. Factoring is the sale of one of those asset categories – your accounts receivable.
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An asset-based line of credit lends against the face value of receivables, including inventory, equipment, etc. That is the difference!
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Liquid assets like cash or marketable securities can lead to higher loan amounts when pledged as collateral.
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The 7 Park Avenue Financial factoring recommended facility is Confidential Receivable Financing, which allows you to bill and collect your own receivables without notifying any parties. Not all factoring companies offer this solution, but thousands of small businesses utilize this type of financing in Canada.
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THE ASSET BASED LOAN VERSUS CANADIAN BANK FUNDING - HOW DOES ASSET-BASED LENDING WORK
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The prime difference in qualifying for such a facility is the difference between this type of financing and unsecured loans via a Canadian chartered banking relationship.
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That banking relationship comes with some requirements that are often not needed when asset-based lines of credit are your real and best solution.
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Some of those traditional requirements might be profitability, years in business, your industry, guarantees of shareholders and owners, etc. Those qualifications are not the focus of asset-based lending. However, the assets are.
ASSET BASED LENDING RATES
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Interest rates on asset financing transactions are typically higher, but they allow your business to access more capital than might otherwise be achievable through traditional financing, such as a traditional bank loan.
HOW DOES ' ABL'? LENDING WORK ON A DAY-TO-DAY BASIS?
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It’s quite simple. You and your asset-based lender determine regularly, i.e., weekly, monthly, etc., what your asset categories total. A borrowing plan is then developed based on those categories, and funds are deposited into your bank account for your firm to use as working capital.?
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In Canada, a 250k facility is more or less the bottom level of this type of financing, and facilities can be arranged into many millions of dollars.
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The asset-based lender develops a ' borrowing base ' based on a combination of your assets, allowing you to draw down regularly as you need day-to-day funds.
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That borrowing certificate is updated regularly, typically monthly, and can increase as your sales and current assets increase via cash flows in and out of the business.
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The additional borrowing power allows your firm to explore growth opportunities it might otherwise not be able to pursue. Owners' credit history is not an essential issue in ABL financing .
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So if you want an easy way to remember the difference between this type of financing and a bank revolving line of credit financing solution simply remember that the bank focuses on the overall financial strength and cash flow, our facility focuses on assets!
领英推荐
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FIXED ASSETS / EQUIPMENT / REAL ESTATE?? CAN BE COMBINED INTO THE ASSET BASED CREDIT FACILITY
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Because your assets are being financed as the primary focus of this type of line of credit facility, you will probably have to report on those assets on a much more regular basis, so your firm should be able to prepare regular reports on receivables, inventory turnover, etc.
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When fixed assets are being financed, e.g., unencumbered equipment you own, an initial appraisal will often be required.
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On huge deals, a field exam might be required.?
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This small-dollar investment, however, can generate thousands or hundreds of thousands of dollars in working capital. The lender determines the liquidation value of equipment and real estate assets and might require an appropriate appraisal.
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An Uncommon Take On ASSET BASED FINANCING
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ABL can serve as a strategic tool for business acquisitions, providing liquidity for deal-making.
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KEY? TAKEAWAYS
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CONCLUSION - ASSET-BASED LENDERS
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Asset Based Lending empowers businesses to transform their balance sheets into powerful funding engines.
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Call? 7 Park Avenue Financial , ? a trusted, credible and experienced Canadian business financing advisor who can help you facilitate the type of asset-based lending/cash flow financing that meets your business needs in the Canadian business financing environment for smaller and mid sized companies.
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FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
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What is an asset-based lending approach?
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ABL asset-based lending is a way for companies to finance growth needs, including larger orders or contracts. Assets of the business are margined for high credit availability - these assets typically include accounts receivables, inventories, fixed assets and machinery, and in some cases, real estate. Small business and medium-sized businesses in Canada utilize this method of financing, and lenders focus on assets in the event a borrower defaults.
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How does Asset Based Lending differ from traditional bank loans?
Asset-based Lending focuses on the value of your business assets as collateral, offering more flexibility and potentially higher credit limits compared to an unsecured loans / traditional bank loans, which often rely heavily on credit scores and financial ratios.
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Can Asset Based Lending help my business during seasonal fluctuations?
Yes, Asset-based line of credit facilities typically adjust with your business cycles, providing increased funding during peak seasons when multiple forms of assets such as inventory and receivables as a pledged asset? are higher and scaling back during slower periods. The ' covenant light structure ' of asset finance? is? appealing to? business owners.
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Is asset-based lending suitable for businesses in the growth phase?
Absolutely. ABL is particularly beneficial for growing companies as it provides access to working capital that increases in parallel with your expanding asset base, supporting sustained growth.
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What types of assets can be used as collateral in Asset Based Lending?
Common assets in ABL include accounts receivable, inventory, equipment, and sometimes real estate. The specific mix depends on your business model and the lender's policies.
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How quickly can funds be accessed through an Asset Based Lending facility?
Once established, ABL facilities often provide rapid access to funds, sometimes within 24-48 hours of submitting updated collateral reports, enabling quick responses to business opportunities or challenges.
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What are the typical fees associated with Asset Based Lending?
ABL fees can include origination, unused line, and monitoring fees. The specific structure varies by lender, but transparency in fee disclosure is crucial for understanding the total cost of financing.
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How does Asset Based Lending impact a company's balance sheet?
ABLs are typically structured as revolving lines of credit, appearing as current liabilities on the balance sheet. This can be advantageous compared to term loans, potentially improving financial ratios.
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Are there industry-specific Asset Based Lending programs available?
Many lenders offer specialized ABL programs tailored to specific industries, such as manufacturing, distribution, or healthcare, with terms and structures designed to address unique sector challenges.
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What role does technology play in modern Asset Based Lending?
Advanced software and fintech solutions are increasingly used in ABL for real-time collateral monitoring, automated borrowing base calculations, and streamlined reporting processes, enhancing efficiency for both lenders and borrowers.
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How does Asset Based Lending fit into a company's overall financial strategy?
ABL can complement other financing methods as part of a diversified capital structure, often used alongside term loans, equipment financing, or mezzanine debt to optimize overall financial flexibility and cost of capital.
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What key financial metrics do Asset Based Lenders focus on?
Asset Based Lenders primarily focus on collateral quality, including metrics such as accounts receivable aging, inventory turnover, and equipment valuation. They also monitor borrowing base compliance and overall business performance indicators.
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How does the borrowing base in Asset Based Lending typically fluctuate?
The borrowing base in ABL fluctuates based on the value of eligible collateral. It may increase as receivables grow or new inventory is acquired and decrease as receivables are collected or inventory is sold, providing a dynamic funding mechanism.
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What are the potential drawbacks of relying on asset-based lending?
While ABL offers flexibility, it requires rigorous reporting and can have higher administrative costs. Over-reliance on asset-based facilities may also limit long-term strategic investments if not balanced with other financing sources.
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How big is the asset-based lending market?
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In 2020, KKR + Co estimated that the asset-based financing market is a 4.5 trillion dollar industry with strong growth projections for businesses with hard and physical assets.
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ABOUT 7 PARK AVENUE FINANCIAL
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7 Park Avenue Financial originates traditional and alternative financing and asset-based financial services providers that offer lease financing, cash flow and working capital financing, and business acquisition loans.
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The company works closely with clients to develop key business strategies based on their unique needs. The company is committed to providing the highest level of customer service and innovation to help businesses succeed.
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Combining our experience and solutions, we help our clients achieve profitable cash flow and debt financing and streamline the process with a full range of credit offerings.
' Canadian Business Financing With The Intelligent Use Of Experience '
?STAN PROKOP 7 Park Avenue Financial/Copyright/2024
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Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil