Boutique lender Acconto Financial Corporation (AFC) says it is promoting its new specialty loan offering to Canada's small- and medium-sized enterprises (SMEs) that provides an alternative to letters of credit (L/CS) and financial guarantees to cover tenants' commercial lease deposit obligations.

As a specialist in commercial lease deposit financing, Acconto assists SME tenant-businesses by providing a point solution through the funding of up-front lease deposit and pre-paid rent amounts during the leasing process.

L/C alternative

Whereas large corporates, especially investment-grade companies, can elicit the assistance of financial institutions for L/Cs and financial guarantees to cover commercial lease deposit obligations, according to Acconto, SMEs typically do not have the capacity to cash collateralise L/Cs or obtain suitable guarantees.

So, instead of making a full deposit payment, tenants can enter an agreement with Acconto to repay the advance through fees, principal, and interest on an amortised schedule throughout the lease term.

Acconto reckons this model is particularly beneficial for SMEs that prefer to allocate funds towards growth and operations rather than upfront rental deposits.

Why Acconto?

Businesses are struggling with operating expenses according to the specialist lender. It says business investment can be daunting for new and existing companies, especially when seeking new or additional rental space for their operations. Lease deposit obligations alone can be tens or even hundreds of thousands of dollars, placing a strain on working capital.

Commercial lease deposit structures disadvantage businesses says Acconto. It reckons that while deposit and pre-paid rent obligations in a commercial lease serve the important purposes of securing a tenant's lease obligations and incentivising prompt payment of rent, commercial lease deposits are effectively interest-free loans to the landlord for the term of a given lease which reduce tenants' working capital

In addition to its specialty deposit loan product, Acconto is also willing to provide term loans to SMEs for general business purposes on a case-by-case basis.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.