We know where you are at. You’ve heard about asset based lenders, are a bit confused about this type of loan financing (It’s not really a loan) and you want to know which companies in Canada best suit your working capital needs.
Everything seems to be going ‘ viral ‘ these days, and we strongly feel that asset based lines of credit from Canadian asset based lenders are right up there – to put it simply, they are ‘ trending up ‘ in popularity .
Let’s examine the key basics of the service offering of asset based lenders in Canada and determine how you pick what’s best for your firm. That is the real challenge.
So, again, what is the service offering really about when you’re looking for an asset based lender? It’s actually a bit more simple to understand than you think. Clients we talk to are of course 100% familiar with a bank operating line of credit – that’s been available forever – if , and its a big if, you qualify.
Loan financing companies offering asset based liens of credit are simply finance firms, usually private and independent , that offer you an operating line of credit – based on the true value of your receivables , inventory, and in many cases fixed assets or real estate that don’t have other liens on them . Simple as that.
We know you’re struggling to see the difference between that bank facility and this newer version of it. The key differences are simply, and that’s why hundreds, probably thousands of firms are moving to this type of working capital and cash flow facility. We’ll summarize the benefits of that facility quickly and easily. They are as follows: easier approval, less collateral, covenants and guarantees from owners, more liquidity, and unlimited financial borrowing power.
Let’s cover off those last two points a bit more; they are the ones that most intrigue our clients who are considering the switch. Asset based lenders approve many firms for either more working capital than the client would have received from a bank , or often times approvals are based on facilities that never would be approved by a bank in any circumstances .
Don’t believe us? Actually many firms who are even in special loans or coming out of bankruptcy can, in many circumstances, access asset based lenders. Why? Because they have the one thing an ABL (that’s the acronym for the industry) needs: ASSETS!
So we think we’ve got you onside with the benefit of an asset based line of credit from loan financing companies in Canada that offer these type of revolving facilities. But which one is best for your firm.
Here’s what you need to know. We speak of a ‘ loan ‘ but keep in mind this is basically an operating line of credit for your firm. The factors that affect who you are best to deal with are as follows – the size of your facility, the current financial situation your firm is in, where you are located, and the mix between A/R, inventory, and those other assets you might have on hand. These type of facilities work best when they are in the 250k and up range. And by the way, up in our case means anything up to 50 Millions dollars, or more!
If your firm doesn’t qualify from a size perspective there are still some unique business financing strategies for current assets that makes sense.
Speak to a trusted, credible, and experienced Canadian business financing advisor. You’ll be on the road to improved working capital health in a short time!