Why Asset-Based Lending is a Perfect Solution for the Canadian Market
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To discover the unique challenges and opportunities business owners face when seeking business lending options in Canada, we interviewed Karim Habib, eCapital’s Managing Director of Business Lending. Karim was frank and open, discussing all things Canada – from the lack of alternative funding options to common challenges companies face in receiving the financing they need. This article covers some of the facts and opinions Karim shared that are relevant to Canadian business owners.
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 eCapital, 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, 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.” eCapital 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 eCapital 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 eCapital’s asset-based lending solutions can help you navigate your business to success? Let’s have a conversation!
About eCapital in Canada
eCapital’s team of industry experts work to thoroughly understand your business before recommending tailored funding solutions to meet your capital requirements. Whether it’s a rapid asset-based line of credit or a strategic long-term financing plan, our skilled, dedicated, and friendly team structures specialized alternative funding that is as unique and distinct as your business.
For more information about how our experienced team supports businesses’ capital requirements through all stages of development, visit eCapital.com
James Poston
James is an experienced product expert in receivables financing, trade finance including purchase order financing, and asset-based lending. In his role, he oversees eCapital’s sales strategy by driving business development and creating unified revenue generation processes across our organization. Utilizing his experience in developing strategic relationships and nurturing strong networks, James is positioned to expand our company’s market footprint and industry associations.
Prior to joining the eCapital organization, James served as Executive Vice President and Sales Director for Bibby Financial Services Canada. During that time, he participated in all aspects of the organization including operations, credit and finally business development where he was named a 40 under 40 Award recipient by Secured Finance Network.
James is a Chartered Professional Accountant and Certified Management Accountant and holds a Bachelor of Economics degree with concentrations in international relations and political economy from McGill University.