In a challenging macroeconomic environment, access to capital can vary across industries. And with small businesses often hurt the most when institutions tighten their lending standards, asset-based financing helps mitigate these challenges by using collateral as a form of surety. But, is it a worthwhile solution for your Alberta business?
Best Places for Asset-Backed Financing in AB?
#1 – Top Five Banks (RBC, BMO, TD, ScotiaBank, CIBC). Why? They generall have the best rates, you need a good credit profile. Alberta-based Credit Unions are also a good place to inquire about this type of financing. They include: ATB Financial, Servus Credit Union, Connect First Credit Union, First Calgary Financial. Keep reading for more details on the best financial institutions that offer asset backed loans.
#2 – Swoop Funding – this company provides equipment and machinery loans for Alberta businesses of all sizes, and they work with various banks as well in their roster. They accept lower credit scores and are faster and more flexible than banks.
#3 – Journey Capital – Another well-reviewed Canadian business lender that may offer equipment loans in AB. They approve lower credit scores, as low as 550. Pretty competitive with Merchant Growth in terms of approval time and rates too.
IMPORTANT TIP: shop around! Ask at least 2-3 lenders to give you a quote before you decide who to go with for financing.
How Does Asset-Based Financing Work?
Unlike a personal loan, credit card, or traditional line of credit, asset-based financing underwrites the loan with collateral, which is similar to a mortgage. The strategy provides lenders with the peace of mind that if the borrower defaults, the financier can seize the collateral and sell it on the open market. The proceeds allow the lender to recoup the principal from the defaulted loan.
To further protect the lender, loan-to-value (LTV) ratios are considerably less than 100%. Typically, the percentage ranges from 60% to 80%, which means $100,000 of collateral will net you a loan of $60,000 to $80,000. Lenders use the ‘margin of safety’ to ensure that if a default occurs, they can sell the collateral quickly and recoup the loan proceeds. As a result, it’s imperative to only consider an asset-backed loan in Alberta if you can repay the funds.
Qualifying assets typically include inventory, accounts receivables, machinery, property, invoices, and other balance sheet assets. Lends will scrutinize the condition and/or value of the asset to determine its liquidity and the potential risks of extending financing.
How Important Is My Credit Score?
Whether it’s a business or personal loan, your individual credit score can play a key role in the terms and cost of credit. When you have a poor credit score, lenders deem you at a higher risk of default, which results in a higher interest rate to compensate for the additional risk.
When applying for an asset-based loan in Alberta, the same challenges can arise. Despite posting collateral, a weak credit score can result in lower LTV ratios and stricter loan covenants. Regarding the latter, rigid terms could mean maintaining minimum financial ratios or limiting other forms of debt financing.
As such, we believe it’s wise to improve your credit score before searching for an asset-backed loan in Alberta. To make the endeavor as easy as possible, our guide on How to Improve Your Canadian Credit Score includes 10 reliable strategies to boost the metric. The Government of Canada notes that “it takes 30 to 90 days for information to be updated in your credit report.” Therefore, you can build momentum in short order.
In contrast, increasing your credit score from 400 to 700 will take more time. It’s a long-term commitment and should be viewed as a gradual process. However, if you follow the 10 tips outlined in our guide, you can achieve success.
Where Can I Find Asset-Based Loans In Alberta?
For applicants with higher credit scores, traditional banks should be atop your list when searching for an asset-based loan in Alberta. The Big 5 — RBC, TD, BMO, CIBC, and Scotiabank — operate nationwide and have the size and scale to meet your needs.
As a fallback option, alternative lenders may be the best resource for small businesses in Alberta. Since the Big 5 cator to larger companies, alternative lenders may be the only choice if you’re an upstart or have low revenues.
If a bad credit score is holding you back, improving the metric is advised before applying for asset-based financing in Alberta. Remember, taking out a high-interest loan will likely worsen the situation by creating cash flow problems. Consequently, securing the lowest rate and best terms should be a top priority.
Below, we curated a list of institutions where Albertans can find asset-based loans:
1. Royal Bank of Canada
With operations across the globe, the Royal Bank of Canada (RBC) has participated in asset-backed lending since 1999. Moreover, RBC works with small, medium, and large-sized companies, so it may suit all applicants.
In addition, its secured revolving lines of credit have the following features:
- LTV ratios can reach 90% for accounts receivable and appraised inventory
- Fixed assets’ appraised values can be used for term loan collateral
- Customer invoices can be priced at 100% of their face value
- You can obtain financing in several currencies, including CAD, USD, and others
2. Canadian Imperial Bank of Commerce
Second on the list, the Canadian Imperial Bank of Commerce (CIBC) issues asset-backed loans in Alberta, and qualifying collateral includes accounts receivable, inventory, property, machinery, and others. Moreover, limited or no financial covenants are available for some applicants.
The only pitfall of CIBC is that medium and large businesses are its primary client base, so small businesses may be out of luck.
3. Roynat Capital
As a division of Scotiabank, Roynat Capital provides asset-based financing in Alberta. The strategy is typically used for asset purchases, financing acquisitions or expansions, succession plans, and balance sheet recapitalizations.
Furthermore, working capital loans can also finance growth, product development, eliminate cash shortfalls, or be used to pay employees. As a result, you should contact Roynat Capital directly to determine the right solution and terms for your business.
4. Liquid Capital
As one of North America’s leading alternative lenders, Liquid Capital provides asset-based financing in Alberta. Loans are backed by real estate, equipment, or other assets, and the secured line of credit is repaid in monthly installments.
Financing can reach upwards of $10 million, and you also obtain strategic guidance to assist your business with operational difficulties. Liquid Capital has a large network of alternative funding professionals across Canada and the U.S., and its advisers understand local markets.
The only downside is Liquid Capital requires a strong or higher credit score to qualify. As a result, the policy highlights the importance of reading our guide.
5. Servus Credit Union
As Alberta’s largest credit union, Servus provides asset-based loans to businesses across all industries. You can apply for fixed or floating-rate loans for business construction, acquisitions, expansions, and equipment financing.
But, please note the repayment terms, the percentage of advance, and required collateral depend on the cash flow of your business.
6. Canadian Western Bank
Since its humble beginnings in Edmonton, Alberta, in 1984, Canadian Western Bank (CWB) specializes in construction, forestry, oil field services, and transportation equipment financing. To apply, you need the following information:
- Three years of financial statements, plus interim financial statements if your fiscal year-end was more than six months prior
- Details about your operations
- Details about the equipment you want to purchase.
In addition, CWB mainly works with mid to large-market businesses, so it’s best for established companies with higher revenues. But, it is a member of the Canadian Lenders Association (CLA), which promotes ethical credit practices across Canada.
7. QuickFi
As a 100% digital solution, QuickFi aims to disrupt the equipment financing market by reducing challenges for small and medium-sized businesses. Promoting a faster and dramatically preferred borrower experience, companies in Alberta can obtain equipment loans in as little as three minutes.
Through its relationships with original equipment manufacturers (OEMs) and banks, special terms and rates often aren’t available elsewhere.
The company also boasts “bank level security,” and is a CLA member institution.
Conclusion
If you need asset-based financing in Alberta, reliable solutions are available. However, since large traditional banks, alternative lenders, and private debt firms dominate the market, local firms tend to focus more on consumer loans. Check out our Top Equipment Loans for Canadian Startups article for more options that cover the entire country, not just AB.
To find the best product and obtain the best terms, it’s wise to submit several applications and inquire about which firms offer the lowest financing rates and the fewest covenants. Remember, loan covenants limit how you can utilize your capital, so it’s essential to understand the ramifications before signing on the dotted line.
Finally, taking the time to repair your credit score can enhance your asset-based loan application and potentially shorten the due diligence process, leading to faster approvals.
FAQ
1. What are equipment and asset-based loans?
These loans are a great way to finance your business without draining your cash reserves. Essentially, the equipment or asset you’re buying acts as collateral, giving lenders security and giving you the funding you need.
2. Need a loan for used farm equipment in Alberta?
If you’re based in areas like Lethbridge or Red Deer, which are big on agriculture, there are plenty of options for used farm equipment loans. These can help you spread out the cost of tractors, combines, or other farm machinery so you don’t have to pay a huge amount upfront.
3. How about loans for restaurant equipment in Alberta?
Whether you’re opening a new spot in Calgary or upgrading your kitchen in Edmonton, there are loans specifically for restaurant equipment. You can use these to finance everything from stoves and ovens to refrigeration units. Used equipment loans are also available, helping you save money while still keeping quality up.
4. Can you get a heavy equipment loan in Alberta, even with bad credit?
Yes, you can. If your credit history isn’t perfect, lenders in Alberta, including those in Calgary and Edmonton, understand that businesses still need access to machinery. While the terms might not be as sweet as those for prime borrowers (think higher interest rates or bigger down payments), there are plenty of lenders willing to work with you.
5. Are there options for used heavy equipment loans in Alberta?
Absolutely. Used equipment is popular, especially in construction-heavy cities like Calgary and Edmonton. Lenders know this and offer loans specifically for second-hand machinery. These loans might have slightly different terms, depending on the condition and age of the equipment, but they can be a cost-effective way to get what you need without going over budget.
6. Who offers the best equipment loans in Alberta?
To find the best loan, compare what’s out there. Major banks and credit unions in cities like Calgary and Edmonton can provide competitive rates. Don’t forget about specialized lenders who focus solely on equipment financing—they often understand your industry better and offer more tailored solutions.
7. Is leasing equipment a good idea in Alberta?
Leasing can be a smart move, especially if you’re not ready to commit to buying equipment outright or if you only need it for a short time. Whether you’re in the booming oilfields near Red Deer or running a small business in Calgary, leasing helps you keep more cash on hand and lets you upgrade equipment more easily when the time comes.
8. Can farmers in Alberta get loans easily?
Farm equipment loans are widely available across Alberta, particularly in agricultural hubs like Lethbridge and Red Deer. These loans help you finance everything from tractors to plows. With flexible terms that cater to the seasonal nature of farming, you can keep your operations running smoothly year-round.
9. What if I have bad credit?
If your credit score isn’t where you’d like it to be, don’t stress too much. Alberta has options for bad credit equipment loans, especially in major cities like Edmonton and Calgary. While rates might be higher and terms a bit stricter, it’s definitely possible to secure financing with the right lender.
Final Tips:
- Explore Local Lenders: Beyond the big banks, look into credit unions or community lenders in your city.
- Check Specialized Lenders: They often have more flexible criteria and industry-specific knowledge.
- Shop Around: It’s worth comparing rates and terms to make sure you’re getting the best deal.
Hopefully, this helps you get a clearer picture of what’s available in Alberta when it comes to equipment and asset-based loans. Good luck with your financing, and here’s to seeing your business thrive!
Get Multiple Quotes!
Once again, we highly recommend requesting at least 2-3 quotes before signing off on an equipment loan anywhere in AB. Aside from your bank or credit union, try popular lenders that specialize in equipment and business loans, such as:
1- Swoop Funding – this company provides equipment and machinery loans for businesses in Calgary, Edmonton, Red Deer, Medicine Hat and all over Alberta. They cater to businesses of all sizes, and they work with various banks as well in their roster. They can offer larger loans if needed and they accept lower credit scores and are faster and more flexible than banks.
2- Journey Capital – Another well-reviewed Canadian business lender that may offer equipment loans in AB. They approve lower credit scores, as low as 550. Pretty competitive with Merchant Growth in terms of approval time and rates too.
Alex Demolitor is a financial writer hailing from Halifax. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators. He has been published on many financial publications, including Investing.com, FXEmpire and others.
