Working Capital Financing & Asset Based Lenders In Canada : The Advice Column You Were Looking For

Business.com / Funding / Last Modified: June 2, 2017
Photo credit: create jobs 51/Shutterstock

Information on working capital financing and asset based lenders in Canada. These solutions solve cash flow challenges faced by Canadian small and medium enterprises in their search for business credit.

Asset based lenders could well be providing your competitors with all the working capital and cash flow solutions you need. The acronym for this type of financing is ABL; simply speaking its daily cash flow provide against your current, and sometimes not so current assets.

Put simply, this facility allows you to margin your receivables, inventory and, should you choose, fixed assets and real estate. You are probably saying to yourself that you could arrange financing on your own those fixed assets and real estate. However, you can use those assets as collateral for your daily revolving line of credit.

So asset financing typically doesn't bring debt or long term loans to your balance sheet; you are just leveraging your "assets" (that's the "A" in ABL) for daily cash flow and working capital.

Why are we claiming that this type of working capital financing just might be your key to business success? Simply because you have probably found it has been challenging to get the full amount of business credit you need. In some cases, you might have discovered it’s been a challenge to get business lines of credit of any manner.

So if your competitors are using this type of financing today, who exactly is eligible for it, and is your firm a candidate? The answer is simply that if your firm has a combination of 250 thousand in working capital assets you are immediately eligible for asset based lines of credit.

We would add that firms with smaller asset sizes can still monetize those receivables via invoice financing or discounting, but that's not our key focus for today's information exchange. For straight A/R solutions we recommend confidential receivable financing, which provides you with the ability to bill and collect and finance your own receivables on your own.

Why should you consider these kinds of offerings? Simply because your firm might be in one of a number of special situations, such as your need for increased daily operating cash, you wish to merge with or finance an acquisition, you have been unable to obtain inventory financing elsewhere, you are growing to quickly for traditional Canadian chartered banking financing, etc. 

The benefits to this type of business financing must by now be pretty obvious. It's all about access to working capital financing and cash flow that you couldn't access before. Assets that couldn't be financed are now financeable, and inventory financing, previously limited or unavailable now looms on your growth horizon.

There are in fact other short term asset based finance solutions that might provide you with the "bulge financing" you need. They include: sale leasebacks, SR&ED tax credit loans, purchase order financing, factoring, working capital term loans and merchant cash advances/short term cash flow loans.

If you want to investigate asset based lines of credit for your firm (remember, your competitor probably already has) then speak to a trusted, credible, and experienced  Canadian business financing advisor who will assist you with identifying benefits and the best solution for your current strained needs in business finance.

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