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Asset Based Lending

Asset based lending allows you to capitalize your company’s strongest assets. It provides your business with financing to pay for corporate expenses, finance important purchase orders, buy inventory and make strategic investments. Our financing solution provides an alternative for small and mid-sized companies that need flexible financing to execute their business plans.

An asset based loan can operate like a revolving line of credit, a term solution or a combination of both. Revolving credit solutions allow you to draw a percentage of the value of your assets on a regular basis. The line gets paid off as the assets are converted to cash, often through sales. Term solutions, on the other hand, provide upfront funding that is paid through regular term instalments.

We are a leading provider of asset based lending in Canada. For more information or a quote, fill out this form or call us toll-free at (877) 300 3258.

Benefits

Asset based lending has a number of advantages over other solutions. Asset based lending:

  • Improves your corporate liquidity and provides working capital
  • Is flexible and can be used for a number of corporate objectives
  • Is easy to manage
  • Can be deployed quickly
  • Costs less than comparable options

How does asset based lending work?

The first step in the financing process is the collateral evaluation. This step allows the lender to establish a borrowing base. During the evaluation, the lender determines the value of the collateral you want to finance and establishes the margins (i.e., lending percentages). The margins are based on the type and quality of the assets.

The most common financing percentages are:

  • Accounts receivable – 80%
  • Inventory – 50%
  • Machinery – 50%
  • Real estate – varies

Once the borrowing base has been established, the client can withdraw funds from the facility by creating a borrowing certificate. The certificate is a statement that details the asset levels at the specific point in time. In the case of receivables and inventory financing, transactions settle as the assets are converted into cash, through normal sales. In other cases, transactions settle by making predetermined term payments.

Uses

Asset based loans have few restrictions and can be used for any tactical or strategic business purpose, such as:

  • Improving working capital
  • Fulfilling large orders
  • Expanding businesses
  • Purchasing corporate assets
  • Financing turnarounds
  • Acquiring businesses
  • Performing leveraged buyouts (LBOs)

Qualification criteria

Asset based financing is easier to obtain than comparable solutions. To qualify, your company should meet these criteria:

  • Minimum utilisation of $1,000,000
  • Accounts receivable from creditworthy commercial clients
  • Additional quality assets, if needed
  • Effective internal controls and collections
  • Reasonable financial statements
  • Must be up to date in taxes, or have a workout plan in place
  • Must be profitable. Alternatively, it must have a turnaround plan

Selecting the best asset based lender for your business

The decision to work with an asset based lending company is very important to the success of your company. Here is a list of questions you should consider asking potential lenders as you evaluate them:

  1. Is the lender based in Canada?
  2. How is the lender funded?
  3. Does the lender have restrictions in the use of its funding?
  4. Does the lender offer a true asset based lending program or is it just a modified factoring plan?
  5. Will your customers be notified of the relationship? If so, how does the notification process work?
  6. How are payments made? Is a lockbox required?
  7. Do they have experience in your industry? If so, for how long?
  8. Do they have experience with your specific type of collateral?

Get an instant quote

We are a leading provider of asset based lending in Canada and can provide you with a competitive proposal. For more information, fill out this form or call us toll-free at (877) 300 3257.

Resources

To learn more, please read:

  1. What is asset based lending?
  2. Can asset based lending help a small business?

Availability

As a leading factoring company, we offer services in all provinces of Canada. For location-specific information, visit: