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Asset based Lines of Credit – Canada’s newest business financing option!

Guest post by: Stan Prokop

Article Overview: Asset based lending , also called ABL financing, is one of the newest and most popular forms of Canadian business financing, allowing business owners ot maximize asset financing of all types.

Asset based Lines of Credit – Canada’s newest business financing option!

Canadian business owners and financial managers want more information on Asset Based Lines of Credit. They keep hearing about these options but are not 100% aware of the nature of this financing, how it works, and why it is becoming increasing popular in Canada.

Similar to other forms of business financing that are newer and not yet in full use in Canada asset based financing, also called ' ABL ' financing evolves from the U.S. and the U.K. . The industry originally started as a simply 'factoring 'or invoice discounting arrangement on receivables. Canadian firms also see factoring more and more as a possible financing alternative, and most business owners understand that factoring or invoice discounting revolves around receivable financing only.

Well what based lending']);"> asset based lending does is to take that basic concept of factoring and include all you other ' assets ', which traditionally are inventory, equipment, and in some cases the actual purchase orders and contracts that your firm receives and wishes to fulfill .

When we sit down with our customers and they ask us for information on based lending']);"> asset based lending we find ourselves often explaining right out of the gate that based lending']);"> asset based lending is not a ' lending of last resort '. Most of our customers are surprised to hear that some of the largest corporations in Canada and the U.S. finance their business through asset based lending. We can safely assume if ABL financing is good enough for brand name blue chip companies with billions of revenue that it is probably a safe bet for us to consider for our small, medium, or large Canadian corporation .

The fact that you as a Canadian business owner can leverage not only your receivables for liquidity, but your inventory, contracts, and equipment and real estate naturally brings true liquidity to the table. Many customers we work with immediately see asset based financing as a major competitive advantage, enabling them to improve relations with suppliers and grow sales with new or existing customers.

In some instances we have pointed out to customers that our best financing solution for a merger or acquisition scenario is an based lending']);"> asset based lending arrangement as it maximizes the true asset and capital power of both firms.

In 2008 and 2009 Canada, like many other countries, or in fact all the world! Experienced a major liquidity and financial crisis. As banks and independent finance companies pulled back on business line of credit, not always because they wanted to, but because they had to, based lending']);"> asset based lending continue to offer more liquidity to customers who were working capital and cash flow challenged. Naturally as many Canadian firms had balance sheet and income statement erosion, ( I.E. financial losses ) the challenge of what one could call ' traditional ' financing became even more greater .

Many of our customers scrambled to get their balance sheets in order, as for the first time in May years loan covenants were in breach, etc.

We don't want to say that the banks and other large finance firms in Canada let Canadian business owners down, but certainly many times it felt like that, and the welcome comfort of an based lending']);"> asset based lending arrangement saved the day for many a firm of all sizes . Not generally know by all parties, but even firms in bankruptcy proceedings can avail themselves of asset based financing during the difficult restructuring period.

One report published in the U.K., which was a poll of accounting firms indicating that in 2009 60% of all clients looking for new bank financing were refused.

In summary, based lending']);"> asset based lending has risen to the top of the pile with respect to a robust full financing options for Canadian firms looking for financing for a combo of one or all of receivables, inventory, equipment, real estate, and contracts . Speak with a credible, experienced and trusted advisor in based lending']);"> asset based lending to determine if it's your firms 'holy grail 'of Canadian financing!

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Article Tags: asset based lending, asset financing, business financing, canadian business, financing option



Related Forum Posts
Its About the Right Money Option - Having the right partners and financing are so important. Locking yourself into a deal with the wrong partners can easily drag you and the business down. Also, great points about finding financing and other partners who understand the goals you have for the business and can help you work toward those. I've been amazed over the years to find the ways to network and to help others. Your financing partner can not only bring money to the table, but connections, information and the background to take the business to the next level. And, since they have money involved, its in their interest to help you make the business a success. ChrisH
Getting financed - It has always been my experience that it will always be better to be in business debt rather than personal debt, but I suppose when you can run your business out of your home and have so little overhead, it could be better to simply finance yourself and secure a business line of credit just in case you need it. On the flip side, when it comes to businesses outside the home, you want to secure financing and SBA is probably the way to go (depending upon what your total project will cost). Banks that provide SBA loan products prefer the loan be 100K or more. Then there are Micro Loans (loans that go up to 35K) and Signature Loans that are unsecured loans and mainly based on your credit score (680 or higher), they can finance anything in between and then some. It's been said in some of my other posts that when you obtain business loans its beneficial because you are building a track record with a lender for future use. Should you get financed via a business loan and later you need additional working capital to keep your business going (or to expand) the lender is going to be more apt to help you because they have already taken on the risk of your loan. Now, they would prefer you better yourself whether it be expansion or to pull yourself out of a hole so you do not default on the 1st loan... and if that means helping you further, believe me they will do it. However, if you finance yourself, who's going to help you with additional working capital if you run into trouble? Lenders won't help you because you financed yourself...they tend to take on the attitude that you didnt need them before, so why now? What if you had originally financed yourslef with home equity and still haven't paid it back...now you have a first mortgage a second or Home Equity line of Credit and your business is in touble and you have no way out.
Re: SEEKING PRIVATE OR ANGEL INVESTOR - Definitely have a thorough and accurate business plan. In the US, you can get help at SCORE - their website is full of great information and you can check for local chapters. If you would like a book that has all kinds of great information about financing options - this one is very good --- HOW TO GET THE FINANCING FOR YOUR NEW SMALL BUSINESS: INNOVATIVE SOLUTIONS FROM THE EXPERTS WHO DO IT EVERY DAY—WITH CD-ROM This new book will provide you with a road map to securing the financing. The book goes into traditional financing methods and assists the reader in setting up proper financial statements and a proper business plan. It details the differences between debt and equity financing and how and why to use each. Valuation techniques are explained for determining what your business is truly worth. However, the book’s real strength is in explaining alternative and creative methods of financing, such as SBA financing, investor angels, IPOs, limited public offerings and venture capital. Essential resources for finding the detailed information you need are included throughout. Item # 9780910627559 $39.95 Shri
Acquiring Financing - Any suggestions from the members here about tips on how to get financing to start a business or additional financing for expansion etc? Shri
10 best franchises to get involved - My advice is: 1) Go to the library and start reading business books (accounting, finance, etc.) 2) Go to your local community college and enroll in night classes 3) Join the local Chamber of Commerce 4) Network / Network / Network -- through the above sources. Once you have spent two years doing the above, then look for a 55 - 60 year old business person that is looking to reduce their time in the business. Then you can work on a sweetheart financing option.


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