Business Credit Line Rates In Canada . Which One Of These Two Works For Your Company

By: stan prokop

Business credit line rates in Canada. What factors determine the cost of lines of credit for your company based on the type of revolving credit line you choose and the particular characteristics of that type of facility? The reality? You've got two basic choices for this method of Canadian business financing, and its perfect legal to check out and consider both! Let's dig in.!br>
One of the largest misconceptions in Canadian business is the fact that there is only 1 type of business credit line in Canada. Wrong! Your company has the choice of the traditional (and revered?!) Canadian chartered bank facility. But in recent years there is a new kid on the block, the non bank Asset based Credit Line.
In the past we are more than sure than most businesses view the bank facility as the best and only way to go re cost and flexibility and borrowing power. It certainly the case when it comes to cost , as Commercial credit lines are based on bank spreads that more often than not come in at 1 or 2% above the current prime rate . These days with rates being so low that bank credit line is tremendously appealing.
When the bank facility isn't appealing is when your firm doesnt qualify for traditional bank criteria which at the end of the day revolve around a small handful of key metrics:
Size of facility
Debt to Equity ratio
Cash Flow Coverage
If your firm has the financial appeal to a Canadian bank a feeding frenzy can easily occur as the banks step over each other racing for your business. What a great deal.
On the other hand your business financing need for a revolving credit line in Canada can be fully satisfied by an ABL. It's a non bank credit line that fundamentally lumps together all your current and fixed assets and allows you to borrow against them in one facility. Confusion often exists when we explain that offering to clients as they can be forgiven as to how they can maintain a business credit line outside the bank. Trust us... they can.
The pricing on Asset based credit lines fluctuates, and that's a bit of an understatement. Typical facilities range at a minimum in the 250k range, and many of the largest corporations in Canada borrow tens of millions of dollars under this type of arrangement.
How does pricing work in ABL, as compared to the bank. Here's the straight answer on that. If your firm can satisfy the 4 key elements of bank business credit lines, as we have noted above, your firm can match or beat bank pricing.
The reality is though that the ABL business credit line rates offer more borrowing power and less restrictive credit criteria for approval. As a result the pricing typically is higher, and in some cases much higher than bank financing. So the correct answer is that ABL credit facilities range anyway from Prime rate to as much as 1.5% per month, essentially mezzanine type rates.
Business owners and financial managers need to balance credit line rates
Against their ability to satisfy lending criteria and access capital they might not be otherwise able to get approved for.
So, what type of credit line and pricing works for your firm? Seek out and speak to a trusted, credible, and experienced Canadian business financing advisor with a track record of delivering business credit facility solutions.

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Stan Prokop - founder of 7 Park Avenue Financial Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info re: Canadian business financing & contact details :

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