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 commercial 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. 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 either applies to your business. Those last two are more rare 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 for small and medium-sized businesses that cannot borrow some or all of the capital they need to finance operations and grow business. business through continuous working capital. needs.
The best way we describe asset-based line of credit loans is simply that they pool your assets in borrowing power, with less emphasis on the overall credit quality that 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 higher borrowing power.
What are the ABL credit line requirements?
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 the overall assessment of assets and your ability to regularly report those assets. This is often easily accomplished using reports that include old accounts receivable, old accounts payable, inventory lists, etc. We suggest to customers that if you can’t provide those basics, you probably have other issues.
Asset-based lines of credit are also distinguished by their “flexibility” – it’s about providing a financial solution that targets any complexity in your business and industry.
Alternative loan types in Canada
Remember also that another key difference here is that the full bank credit facilities of our licensed banks tend to offer fixed upper limits and are almost always reviewed on an annual basis.
ABL lines of credit can easily fluctuate with your sales levels, and increases in borrowing power are more easily achieved as seasonality and sales increases occur in your business. Many companies gravitate towards asset-based lines of credit for the sole reason that it allows them to take on larger deals, new contracts, etc.
Thousands of companies are testing the asset-based financing alternative – it’s about flexibility, specialization, and increased liquidity.
Alternative finance requires special knowledge of your business needs, so it is recommended that you seek out and speak with a trusted, credible, and experienced Canadian business finance advisor with a track record of business financial success who can help you with your loan needs.