A bank line of credit alternative can be found through asset-based financing solutions for Canadian businesses. Additionally, this type of business capital offers many reasons for financial owners/managers to consider an alternative to a small business line of credit in Canada. We are discussing some of those reasons. Let’s delve into.
The Business Line of Credit Alternative
The ability to borrow as much as you can under an asset-based finance line of credit is a key part of the appeal of ‘ABL’ loans, particularly the revolving line of credit option. Those selected assets almost always include: accounts receivable, inventory, and fixed assets. Alternative lenders tend to be adept at analyzing all of your business assets to maximize borrowing power.
Alternative loans also have the ability to differ from traditional bank financing. Please also note that it can potentially include real estate and in some cases even your intellectual property if either applies to your business. Those last two are rarer additions to your loan, but they are there. Interest rates are almost always higher on asset-based revolving lines of credit, but they offer a financial alternative to small and midsize businesses that can’t borrow some or all of the capital they need to finance operations and grow business. business through continuing working capital. needs.
The best way we describe asset-based line of credit loans is simply that they pool your assets into lending power, with less emphasis on overall credit quality than our banks focus on when it comes to quality. balance sheet, cash flow, and profit/loss history. . Compared to other types of financing, most commonly bank revolving, this solution almost always offers significantly higher lending power.
What are the requirements of the ABL line of credit?
ABL loans are offered by commercial lenders who, in some cases, even have significant experience in their industry as it has been their niche. But at the end of the day, every asset-based lender focuses on the overall evaluation of assets and your ability to regularly report those assets. That is often easily accomplished through reports that include accounts receivable past due, accounts payable past due, inventory lists, etc. We suggest to customers that if you can’t provide those basics, you probably have other problems!
Asset-based lines of credit are also distinguished by their “flexibility”: it is about providing a financial solution that focuses on any complexity of your business and industry.
Alternative loan types in Canada
Also remember that another key difference here is that full bank lines of credit from our authorized banks tend to offer fixed maximum limits and are almost always reviewed annually.
ABL lines of credit can easily fluctuate with your sales levels, and increases in borrowing power are usually easily achieved as seasonal and sales increases occur in your business. Many businesses gravitate toward asset-based loan lines for the sole reason that it allows them to take on larger deals, new contracts, etc.
Thousands of companies are investigating the alternative of asset-based financing: it is about flexibility, specialization and greater liquidity.
Alternative finance requires special knowledge of your business needs, so it is recommended that you find and speak with a trusted, credible and experienced Canadian business financial advisor with a track record of business financial success who can help you with your loan needs.
