Toronto asset based lenders come in a wide variety of shapes and sizes, each focused on a particular slice of the market. The bases of asset based lending is a clear understanding of the underlying assets being financed and the means to secure and take action to reclaim value in the event of default.

Because there are several different types of assets that can be deployed in a given business, there can be several different asset based lenders providing business financing solutions that can be relevant to your requirements.

The other key aspect of asset based lenders is the risk level they service. Risk levels are assigned by business financial performance and asset type. For instance, there are working capital asset based programs that are provided by major banks as a way to provide greater financial leverage to their large corporate clients that can’t fit into the leverage limits of the banks traditional corporate lending programs. These programs come at prime plus and are typically limited to financing facilities with a minimum working capital requirement of $10,000,000.

When a business does not qualify for big bank working capital asset based financing, the next level of asset based lending that provides similar levels of leverage can see the rates shoot up to between 12% and 18% requiring certain margins and cash flow turnover ratios to make the cost of financing work.

Toronto asset based lenders exist for different specific assets and asset combinations. Each lendng model is based on the lenders ability to monitor higher ratio and/or higher risk lending from a cash flow perspective and to predictably liquidate assets held as security in the event of loan default.

Like with any lending model, the greater the risk and the more unique the lending application, the higher the related interest rate you can expect. Many Toronto asset based lenders will also work within a certain loan size range with larger loan amounts being provided by fewer lenders for each type of asset based requirement.

In situations where a business has considerable amounts of receivables, inventory, equipment, and real estate, there can be several different Toronto asset based lender options to consider, each with its own potential unique pricing and terms of use.

Click Here To Get Assistance Locating And Securing Toronto Asset Based Lender Options For Your Business

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While the category of asset based loans and asset based lending is continually growing in terms of application and money supply, the overall financing category remains confusing and misunderstood by many business owners.

The general idea is that an asset based lender is more focused on the market value of the underlying security being offered and its liquidation pathway in the event of loan default.

While this is a strong underlying theme, this financing category is goes much farther a field in almost every direction.

There are asset based lenders that only focus on one type of asset such as inventory lenders, purchase order financiers, accounts receivable factors, equipment lenders or leasing companies, real estate lenders, and so on.

By focusing on a particular classification of asset, the lender can more accurately assess the market, set up a predictable and efficient liquidation pathway, and attract investor or lender financing to fund their asset based loan model.

But there are also asset based lenders that work across categories such as working capital models that finance against accounts receivable, inventory, and potentially equipment. Or term lenders that focus more on equipment and real estate.

And there are also different slices to the market in terms of bank and institutional lenders versus private lending sources.

The more the lending decision is based on the value of the asset alone, the higher the rate is likely going to be. Because banks also participate in asset based lending, greater scrutiny is applied to lower cost forms of asset based loans.

While there is large variation in business loan size among lenders, there are once again slices of the market that service different levels of financing. In general, asset based loans are for commercial financing requirements above $500,000 in order to justify the work that goes into assessing them and the ongoing monitoring that may be required on a monthly basis.

The more an asset based facility is based on working capital cash flow, the more monitoring that will be required and the more control the lender will have with respect to the cash inflows and out flows.

Because there are so many types of asset based lenders that tend to overlap with respect to the deals they will look at, there can be several different types of options and related pricing to consider.

Unless the asset based financing is bank or institutionally based, its likely going to be short term in nature (one to two years) and is being used as a bridge loan to allow the borrower the capital and time to get into a better financing position which will allow refinancing into a lower cost institutional program.

And the right choice is not always the lowest cost. Some programs have very restrictive operating requirements that may not provide you with the flexibility you need to operate properly. Others may require high repayment penalties if you have the opportunity to refinance them before the term is up.

Regardless of the application, you will likely have a list of options to consider that can be hard to locate and harder to secure.

Because asset based loans will typically be one step in a multiple step financing process, you would be well advised to work with a business financing specialist who can help you map out a financing strategy that will work the best with the most relevant asset based loan sources available to you.

Click Here To Speak To Business Financing Specialist Brent Finlay

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