Ontario asset based lenders lead the Canadian market in terms of coverage of the market place.
Because of the size of the Ontario market compared to other areas of the country, asset based lending in Ontario can function in a relatively small geographic area which is very appealing to asset based lenders who typically require regular monitoring of accounts.
The term asset based lending can mean a number of different things, but for the most part its about lending against the market value of assets that a specific lender knows how to liquidate in the even of default.
Asset based financing is by definition higher risk lending because more of the lending decision is based on the security value of the asset as compared to bank or institutional lenders that require lower levels of overall balance sheet leverage in order to justify a loan request.
With an asset based lender, the lending decision is more about the difference between the immediate liquidation value of assets and the amount of financing they provide. As a result, it is much more formulaic than conventional bank lending.
That being said, a growing area of larger Ontario Asset Based Lending is in the bank’s own specialized niche for asset based loans.
In this particular space in the market, larger banks are providing higher amounts of leverage to clients that are in the lower risk range of the asset based lending world. These are typically asset based loans for $5.0 M plus, so are only available to a small percentage of the market.
For the majority of small business and medium sized businesses in Toronto and the Greater Toronto Area, there are a considerable number of different asset based financing options where either one type of asset is the focus such as a pure accounts receivable factoring house, or a number of assets can be considered collectively.
Each model typically has its own unique fit into the market and financing costs and structure.
The challenge for a business owner, especially for one that has a variety of assets that can be financed through asset based lending, is picking the right model.
In some situations, using more than one asset based lender can be preferred in order to obtain both maximum leverage and a lower cost of financing.
But more lenders involved can also lead to more deal complexity and greater administration requirements to meet the needs of all parties involved.
The best way to approach this area of the market is to work with a business financing specialist that works in the market and has direct experience with a variety of Ontario Asset Based Lenders