Asset-based LendingBlog

Why Asset-Based Lending is a Perfect Solution for the Canadian Market

By 12.22.21May 4th, 2022No Comments

This year was an exciting one for many reasons—one of them being the launch of our new office in Canada, run by Karim Habib. This month, we sat down with Karim to discuss all things Canada—from the lack of alternative funding options to common challenges companies face in receiving the financing they need, as well as the current state of the marketplace. Find out why we made the decision to open an office in Canada and how the benefits of asset-based lending in this new territory will be great.

The banking scene in Canada

In the United States, there are many banks everywhere we look. This is not the case in Canada. There are actually only five or six banks throughout the entire Canadian region. This means that these few banks must accommodate every person and business that seeks financial help. And it’s not always that easy, especially for rapidly growing new businesses. The rules and covenants of these banks are especially strict. A company seeking a loan would need to already have at least $10 million in revenue in order to qualify. Even if these businesses are projected to reach this figure fast, banks will often look the other way if they are not already there.

The relationship between banks and growing businesses

Why are there such high restrictions? Unfortunately, banks do not place as much value in rapidly growing businesses. And any business of this kind that applies to one bank will likely face the same response at any other bank, as the set of standards is generally the same everywhere. So, it’s a “catch-22”: You need the funding to grow, but can’t receive funding until you reach that growth. As a result, new businesses and start-ups essentially don’t always receive the financial assistance from banks that they need to stay on the track for fast growth. In situations such as these, asset-based lending could be exactly what a company needs to stay on its growth trajectory.

Asset-based lending values rapid growth

Financial institutions, like us here at Gerber Finance, take a different approach when assisting new businesses. Instead of looking at revenue intake and statements, we examine the “big picture” of the business that’s seeking a loan—from its management team, the receivables, and the value of the product that’s sold to the public. In short, a business that chooses an asset-based lending loan will find there are not only fewer restrictions, but that this solution provides greater flexibility and “breathing room.”

How Baby Gourmet used asset-based lending

Baby Gourmet, the largest baby food company in Canada, wanted to fund their growth but without diluting their interests or giving up ownership. As it turns out, Karim himself was familiar with Baby Gourmet before he came to Gerber Finance, as he had been formerly employed at the bank that received its application for a loan. “It was a classic case where it was not big enough for the big banks to service them—and I had the misfortune to turn them down.” Gerber Finance stepped in to provide debt funding that helped Baby Gourmet grow, which ultimately led to a very successful sale.

If you are a company that is considering opening up shop in either the U.S., Canada—or both places—you are in luck as far as currency is concerned, as Gerber Finance provides lines of credit that have both a U.S. capacity and a Canadian capacity. (Can it really get much better than this?!)

Ready to discover how Gerber Finance’s asset-based lending solutions can help you navigate your business to success? Let’s have a conversation!

eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment financing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.


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