YOUR COMPANY IS LOOKING FOR AN ABL ASSET BUSINESS LINE OF CREDIT!
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Financing & Cash flow are the biggest issues facing business today
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Don't you just hate them? We're talking about the ‘cash flow crowd’. That's why an ABL revolver loan via asset line of credit finance is quite simply, a way to beat that crowd at their own game.
However, all sarcasm aside, the concept of cash flow and servicing cash flow is a key driver in business credit. That's where the ABL line of credit goes against the grain. This time-worn method of business revolving credit is a great solution for asset intensive businesses that cannot always meet those stringent cash flow requirements.
As we said, it's all about assets, so if your firm has them, specifically A/R, inventory and equipment you're in a great position to qualify for this method of Canadian business financing for your credit line. It's been around a very long time, but quite frankly simply got more popular in recent years.
And just because it’s an alternative source of finance absolutely does not mean its anything approaching a 'lender of last resort'. The proof? Some of the largest and most successful corporations in Canada utilize it! And we’re talking public companies and private.
So why do business owners and their finance managers gravitate to an ABL revolver loan? It can be summed up in one word, flexibility. Can they be cheaper also, when it comes to financing rates? The reality for the majority of businesses is that it will be more expensive, but the trade-off here is simply more liquidity. But for the record, there are numerous circumstances when ABL pricing meets or exceed that of the Canadian chartered banks. It's basically a question of overall credit quality and deal size.
Many ABL type deals are used by investors and business owners to complete a buyout transaction. That can be in the context of an acquisition or a change in overall ownership.
We do remind clients though that although the focus isn’t all on cash flow as with a bank line of credit focus the reality is that there is more monitoring and reporting when it comes to an asset line of credit finance facility. That might also include some appraisals prior to setting up the facility.
The positive trade off to that is simply that you have access to more liquidity - with receivables typically margined at 90% and inventory and equipment margins significantly exceeding Canadian chartered bank margins. The bottom line is that it’s your assets driving your access to liquidity, without being hampered by rations or covenants.
Speak to a trusted, credible and experienced Canadian business financing advisor on why the ABL line of credit can unleash the power of liquidity for your Canadian business.
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Stan Prokop 7 Park Avenue Financial/Copyright/2020
