A bank credit line alternative can be found via asset based financing solutions for Canadian businesses. Additionally this type of capital for business offers many reasons for owners/financial managers to consider an alternative for a small business line of credit in Canada. We’re discussing some of those reasons. Let’s dig in.
The Business Credit Line Alternative
The ability to borrow the maximum you can under an asset based financing credit facility is a key part of the attractiveness of ‘ ABL ‘loans – in particular the revolving line of credit option. Those selected assets include almost always: Receivables, Inventory and Fixed Assets. Alternative lenders tend to be experts in looking at all your business assets so as to maximize borrowing power.
Alternative lending also has the ability to differ from traditional bank finance – Note also that potentially you can include real estate and in some cases even your intellectual property if either of those applies to your company. Those latter two are more rare additions to your borrowing, but they are there. Interest rates are almost always higher in asset based credit line revolving facilities, but they offer a financial alternative to small and medium sized businesses who are unable to borrow some or all of the capital they need to fund operations and grow the business via ongoing working capital needs.
The best way we describe asset based credit line loans is simply that they bundle your assets into borrowing power, with less emphasis on the overall credit quality that our banks focus on as it pertains to balance sheet quality, cash flow, and profit/loss history. Compared to other types of financing, most commonly the bank revolver, this solution almost always delivers significantly more borrowing power.
What Are ABL Line Of Credit Requirements?
ABL loans are offered by commercial lenders who in some cases even have significant expertise in your industry as it’s been their niche. But at the end of the day every asset based lender focuses on the overall asset evaluation and the ability of you to report on regular basis those assets. That is often easily accomplished by reports that include aged receivables, aged payables, inventory lists, etc. We suggest to clients that if you can’t supply those basics you probably have other problems!!
Asset based credit lines also distinguish themselves via ‘ flexibility ‘ – It’s all about providing a finance solution that is focused on any complexity in your business and industry.
Types Of Alternative Lending In Canada
Remember also that another key difference here is that whole bank credit facilities from our Chartered banks tend to offer fixed upper limits and are reviewed almost always on an annual basis.
ABL credit lines can easily fluctuate with your sales levels, with increases in borrowing power most often easily accomplished as seasonality and sales bulges occur in your business. Many firms gravitate to asset based lending lines for the sole reason that it allows them to take on larger business, new contracts, etc.
Thousands of firms are checking into the asset based financing alternative – it’s about flexibility, specialization, and increased liquidity.
Alternative finance requires special insights into your business needs, so it is recommended that you seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business financial success who can assist you with your borrowing needs.