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One Real Way To Solve business financing challenges - Asset Backed Lending

Guest post by: Stan Prokop

Article Overview: Why asset based lines of credit give you the financing your company needs! Information for Canadian business owners and financial managers on asset back lending facilities that provide your firm with the business financing you require . How these facilities work and what their benefits are for your growth and profit potential.

One Real Way To Solve business financing challenges - Asset Backed Lending

Something that works. We all want that. And in the new business financing reality of 2010 and 2011 asset backed lending might be your new choice for Canadian business financing.

Asset based line of credit facilities are becoming more popular everyday. It is simply a newer method of lending to Canadian business with a total focus on assets. 'Assets'. That's the key word. So which assets are they? ask clients. Typically these include inventory, receivables machinery and equipment in your fixed assets part of the balance sheet, and in some cases real estate. In some very unique cases IP, or intellectual property, a la patents, etc can be financed.

Another new common category is tax credits, such as SR ED (SR&ED) tax credits. Tax credits are in effect receivables, money owing to you from the government that is in the form of a non repayable type grant. So monetizing that asset as soon as you can allows you to employ cash more efficiently in your business.

Our clients typically imagine inventory and receivables as being the only items they could margin for liquidity with their bank. The reality is that even inventory financing is becoming more difficult in the chartered bank environment, certainly for start up, smaller, and medium sized firms. That therefore is the main difference in an asset backed lending and working capital facility; in its simplest form it's simply the margining of all those other assets to capture maximum liquidity.

So who is actually using these types of cash flow facilities, and why are they a very solid alternative to what is termed ' traditional' bank financing. (We're not so sure these days that ' traditional' bank financing is as available as it used to be - what do you think?!)

The truth is that this type of Canadian business financing is an alternative to bank financing, its real, its available, and allows you to not having to consider more unpalatable options such as raising new equity and diluting your ownership.

We are all for secured bank lending... if you firm can qualify for all the lending it needs. But if you have had financial challenges then consider asset backed lending as a solid option. What are some of those ' challenges' we speak of that might not allow you get Canadian chartered bank financing... its issues such as a temporary loss, a turnaround, new ownership, balance sheet ratios and covenants that might not work for the bank, etc .

Asset based finance does not really care about all those issues - yes they are discussed, but it always comes back to ' the assets ' - and if you have them you can margin them on a daily basis for working capital and cash flow .

So whats the catch. While we feel the advantages of based lines of credit']);"> asset based lines of credit far outweigh the alternatives, the reality is that 95% of the time this type of financing is more expensive. It also requires more reporting on an ongoing basis, although most business owners we talk to will gladly pay more finance charges and are ok with reporting if they in fact have all the cash flow they need to grow and profit in today's competitive environment. You can also expect a bit more due diligence on your overall asset quality when you set up the facility.

There is always a bottom line in business, and in our case today it's that an asset backed line of credit facility is a new and emerging working capital financing that provides your firm with all the liquidity to grow. Speak to a credible, experienced and trusted Canadian business financing advisor to determine if this type of working capital and credit facility benefits your firm.

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Article Tags: asset backed lending, business financing



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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
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
Re: Kevin's Case Study #8 - How do you attract a finance expert? - I think the best way to find any reputable accountant would be by recommendation. If you cannot get one by recommendation then you should put those you narrow down your search to through an in depth prescreening process. Check the out their firm with BBB and make sure they are licensed & registered. Always check credentials and make sure they graduated from the schools they claim to have attended. Financing should be found in accordance to the type of financing you need and the type of business you are financing. You should always get prequalified before commiting to an application. You should seek out those financial institutions that specialize in the type of financing you are seeking and then check to enure they can finance your type of business.
Securities - Lending guru: I assume your securities offering has been registered - since you appear to making a general public solication


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