A bank line of credit alternative can be found through asset-based financing solutions for Canadian businesses. In addition, 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 dig in.
The Business Line of Credit Alternative
The ability to borrow as much as you can under an asset-based financing 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 finance. Also note that it can potentially include real estate and, in some cases, even your intellectual property if any of it applies to your business. Those last two are rarer additions to your loan, but they’re there. Interest rates are almost always higher on asset-based revolving lines of credit, but they offer a financing alternative to small and medium-sized businesses that can’t borrow some or all of the capital they need to finance operations and grow the business. business through continuous working capital. needs.
The best way we describe asset-based line of credit loans is simply that they pool your borrowing assets, 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 the bank revolver, this solution almost always offers significantly greater 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 your industry, as it has been their niche. But at the end of the day, every asset-based lender focuses on your overall asset evaluation and your ability to regularly report on those assets. That is often easily accomplished through reports that include past due accounts receivable, past due accounts payable, inventory lists, etc. We suggest to customers that if you can’t provide those basic items, you probably have other problems!
Asset-based lines of credit are also distinguished by their “flexibility”: it’s all about providing a financial solution that is focused on any complexity of your business and industry.
Types of alternative loans in Canada
Also remember that another key difference here is that full bank lines of credit from our licensed 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 generally easily achieved as sales and seasonal increases occur in your business. Many companies gravitate towards asset-based loan facilities for the sole reason that it allows them to take on larger businesses, 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 to a trusted, credible and experienced Canadian business financial advisor with a track record of business financial success who can assist you with your loan needs.