Tweet

Why an Asset Based Lender Is Your Working Capital Solution

Guest post by: Stan Prokop

Article Overview: Asset based Lines of Credit For Canadian Business Financing.Information on why an asset based lender might be the solution for your firms working capital challenges . Why does this facility provide more cash flow and working capital than a bank operating line of credit .

Why an Asset Based Lender Is Your Working Capital Solution

When we ask clients if they will consider an asset based lender for a working capital refinancing many business owners will come back with a surprise questions for us - namely ' What is an Asset Based Lender , and what do they do?'

Asset based lending in Canada is still relatively speaking a fairly new for of business financing. Business owners and financial managers are moving to this form of financing for several reasons which we will discuss.

As the name implies the financing it focuses on your business assets. All sizes of companies in Canada can utilize asset financing - even start ups. Practices vary within the industry as to how the financing works on a day to day basis - frankly this is one of the biggest challenges that owners face, i.e. understanding the offering in the Canadian marketplace. (Asset based lending, or 'ABL 'is very commonplace in the U.S. )

Rates in Canada vary all over the place for these types of financing. The size of your financing as well as the overall perceived ' quality ' of the transaction ( as perceived by the lender, not yourself!) dictate financing rates - In Canada Abl financing cost vary from 9%/annum to , on many occasions 2% per month . Although the financing is generally more costly it has repositioned many firms for survival and growth - simply because it brings more working capital and cash flow into your business.

The asset based lender only has one focus (your bank has two focuses). That focus is on the 'true' value and size of your underlying assets.

Let's use a quick example to demonstrate the true power of asset based lines of credit. Let's pick a sample company with say 4 Million in revenue, with the following asset size categories:

Receivables - 300k

Inventory - 250k

Equipment (unencumbered) - 400k

It is extremely common, using the asset sizes above that the firm's bank might offer up a 225k line of credit for the receivables. For discussion purposes lets say they provided another 75k based on the personal guarantees of the owners. That's a total of 300k. We can assure readers this would be a very common formula for a Canadian chartered bank, i.e. 75% on receivables, with no financing provided against inventory, etc.

So how an asset would based lender look at this transaction. Remarkable the line of credit provided could be in the 500k range, as an ABL lender would advance against receivables, 40% against inventory, as an example, and would also assess some value in the equipment and provide working capital financing against that.

So while the company's asset size stayed the same the firm came close to doubling working capital and cash flow under the asset based lender. That is true working capital power.

Although the majority of asset based loans are used for straight working capital and operating facilities, many times they can be structured to allow for a major restructuring or merger and / or acquisition. Again, assets are leveraged to produce cash.

Investigate an asset based lender solution. Although sometimes more costly they provide a source of capital and do not directly affect your overall balance sheet - you are simply leveraged operating capital to the max.

Talk to a credible, trusted, and experienced advisor in this area of Canadian business - that is a solid Canadian business financing strategy for future profits and growth.

Related Articles
  Eliminate Commercial Finance Pressures With An Asset Based Lender
  Asset based Financing and Lending Canada – What is it?
  Why An Asset Based Loan Might Be Your Best Business Line of Credit Solution in Canada
  Asset Based Lending Canada - Why An ABL Working Capital Loan is Your 2011 Finance Solution
  Worth Considering – Why A Canadian ABL Lending Facility & Asset Based Loan Is Unique
  What Asset Based Finance Could Do For Your Company
  Asset Based Lending - What you wanted to know and were afraid to ask!
  Small Business Loans for Manufacturers Unlock the Value of Existing Assets to Secure Working Capital
  Can ABL Finance Eliminate Sleepless Nights ? Here’s How An Asset Based Lending Business Line Of Credit Can Help
  2 Reasons Why Working Capital Financing via a Business Line of Credit is the best Asset Financing for your Business
  Why Asset Finance, aka Asset Based Lending is the Ultimate Working Capital Financing Solution to your Business Challenges
  Inventory Financing – Canada - A unique financing challenge
  Working Capital Loans – Cash Flow Business Financing Canada
  On Top Of The Latest Trends In Canadian Growth Financing? Working Capital & Purchase Order Finance Alternatives
  Why A Business Asset Based Loan Financing Is The Perfect Solution For Cash Flow In Canada
  Who Are The Best Asset Based Lenders ? Looking for loan financing companies in Canada for Working Capital?
  Asset Based Line Of Credit and Working Capital
  The Evolution Of The Sale Leaseback Transaction In Canada . Get The Most From Your Lease Finance Company
  Asset Based Lines of Credit – Canadian Financing Solutions
  Inventory Loans – Financing Inventory Assets

Article Tags: asset based lender, cash flow, working capital canadian business



Related Forum Posts
Re: Google's April 2012 Update - As far as I understand, Google's main search mission is to deliver The Best Solution Possible, when you type in a query. This means that they kind of _cant_ teach people how to "game the system" and rank themselves. The way I see it, by the time Google's done evolving their algorithm, the only way to get to the top is going to be "Be A Fantastic Solution Provider... across the board... for your niche/keyword."
Re: What is Your Favorite Thing About Owning A Business? - [quote="freddyb45":1t3lpfi8]For me it's the fact that all the time and effort you put in is worth a lot more, due to it making you "business" more profitable. Working for yourself is also a positive, although employing people you can trust is quite different.[/quote:1t3lpfi8] I like this idea. Working for yourself means you are investing in your own future, not someone else's, although there is value in working for someone else first to gain experience and confidence. Working for yourself does not automatically mean success, fame and fortune. For most entrepreneurs, it takes much work and dedication to get to the point of financial success and comfort - sometimes years. But the benefit is, again, you know you are investing in yourself and building equity for your own future. GT :-]
$1,000,000 - Hi Evan, Are you talking about US Dollars? If so, that would be approx £500,000 in the UK. The Canadian Dollars differs also from the Australian Dollar. In any case, one needs to solve problems to help people to get money. The more solutions are given to people's needs to solve their problems, the closer one gets. Finally, are we talking about 'Income' or can we talk about 'Asset'? Kindest Regards Beat "Unlock People's Potentials!"
Del Castienne - International Business and Project Brokers - In addition to the above, Del Castienne is an international brokerage firm specializing in various entrepreneural services. Del Castienne is more than just a brokerage, as we facilitate Private International Venture Capital for Business and Projects from Commodity Speculation Transactions, MBO, MBI, M&A, Bridging Finance, Patents, Branding, JV, Corporate Advisory Services, Business Plan Development, etc.. Del Castienne is linked to 1200 private international Venture Capital consortiums and Funding Syndicates with a funding capacity of $ 115 billion and 5000 international Investment Bankers and Business & Project Brokers. This in itself should provide you with a gateway to the best source of funding in the world. Through Del Castienne any entrepreneur can have up to a potential success rate of 25% (conditions apply) with absolutely no up front costs. Del Castienne charges a maximum of 5% commission which is far below the international standard of 10% - 12% on project value. If you are tired of running back and forth with countless dissappointments, please give us an opportunity to assist you. Our minimum Venture Capital amount is $1 million and we a Commitment Letter can be provided with in 30 days after formalities are in place and your information was received.
Re: help wanted in u.k. - Working on it all, a new world to me cheers brendan


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

LEARNING TO HAVE FUN – EVERYDAY!

WHAT IS MANAGEMENT CONSULTING

Quick Tips on Buying a Business

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.