Business Revolving Credit Line: The Strategic Financing Tool | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR A BUSINESS CREDIT LINE!

 

The Asset-Based Line Of Credit Is A Solid ‘ Day To Day ‘ Business Financing Option

Information on the ABL revolver, the business credit line that combines asset-based lending with a working capital solution

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        Financing & Cash flow are the biggest issues facing businesses today

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                              ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

                  EMAIL - sprokop@7parkavenuefinancial.com

 

 

 

 

BUSINESS OPERATING CREDIT LINE SOLUTIONS

 

 

 Fresh counts, whether we're at the grocery store or, in today's example, the business credit line known as the ABL revolver, aka ' asset-based lending. '

 

It's never been easier to qualify for a business credit line. Regarding approvals, your basic requirements are a well-managed business, up-to-date financials, and business assets such as accounts receivable,  fixed assets,  and steady or growing sales.

 

They're the ingredients for improving cash flow or effecting a business turnaround with more capital in your business.

 

 

Unlock Financial Freedom with Revolving Credit

 

Cash flow constraints can strangle your business growth and threaten operational stability. When seasonal dips, payment delays, or unexpected expenses arise, panic sets in as options dwindle.

 

Let the 7 Park Avenue Financial team show you how a business revolving credit line eliminates these worries by providing immediate access to capital when you need it most. It allows you to manage expenses confidently while only paying interest on what you actually use.

 

Uncommon Takes on   Business Revolving Credit Lines

 

1. Unlike traditional loans, a revolving credit line can improve your business's financial discipline by encouraging more strategic borrowing practices and better cash flow management.
2. Many Canadian entrepreneurs overlook how revolving credit can build a reputation with suppliers by enabling consistent, on-time payments even during seasonal downturns.

 

 

CANADIAN BUSINESS HAS A CHOICE IN BUSINESS CREDIT LINES!

 

Canadian business owners and managers don't often realize they have more of a choice in business credit lines than they think. And when it comes to choice and flexible terms, asset-based lending facilities are suddenly getting... you guessed it... popular!

That's, of course, great news for companies in Canada who are looking for alternatives for day-to-day operating financing. The traditional small handful of firms that offer this type of financing is growing to the point where you might not realize it, but people are willing to fight for the ability to provide you with business credit. That's the type of competition we like.

 

 

 

WHY SHOULD YOUR FIRM CONSIDER AN ASSET BASED LINE OF CREDIT 

 

Depending on your industry and business model and considering all the aspects of your cash flow cycle it is not unusual for a business to be low on cash -

 

The investment required to carry receivables and inventory and slow-playing clients can hinder a business's growth.

 

ABL revolving credit lines are for companies looking for a ' full service ' financing facility that mirrors the benefits of traditional financing.

 

Any business with sound business practices around invoicing, collection, and the ability to provide up-to-date listings of receivables, inventory, etc., can benefit. Many smaller firms can simply utilize a factoring /AR  financing facility that might meet their needs.

 

 

HOW DOES THE ASSET-BASED LINE OF CREDIT WORK ON A DAY-TO-DAY BASIS?

 

 

Asset-based credit lines work in the same way unsecured bank lines of credit work  -

 

The facility revolves around the ongoing levels of your accounts receivables and other business assets, which are bundled into it.

 

As your firm draws down on the line of credit, it fluctuates based on your cash inflows/collections.

 

A key benefit of ABL business credit lines is that they grow automatically as your sales grow - and an additional benefit is that borrowing margins exceed bank lines of credit - As an example, A/R is often margined at 90% - 

 

Factors that affect your drawdown ability include the general health of your receivables via your customer base,e and businesses pay only on the amounts utilized at any given time.

 

A typical facility will have the business submitting end-of-the-month ledgers/schedules around your a/r and inventory levels-

 

Which becomes a borrowing base you can draw down in the following month. 

 

Clients of 7 Park Avenue Financial are always focused on the difference in day-to-day borrowing - the answer is quite simple - a bank facility has your business assigning your receivables to the bank while an ABL facility secures the specific assets such as  a/r, inventory, equipment -

 

Businesses are surprised to find that even the equity in company-owned commercial real estate can be bundled into borrowing capacity and, in some cases, intellectual property.

 

 

 

  

THE COST OF BUSINESS FINANCING   

Cost is always a factor in business financing, and a broad spectrum of pricing in Canada is primarily based on two factors you can pretty much guess: facility size and credit quality.

In case you haven’t heard of this method of business credit, it’s simply a comprehensive credit line based on the asset of your business -

 

If they fit into your overall capital structure, those assets include inventory, receivables, fixed assets, and land and buildings.

 

  

  

ABL FACILITIES HAVE A WIDE VARIETY OF USES     

The Canadian business owner/manager can use the ABL revolver facility for several reasons, including day-to-day operating capital, restructuring, acquiring another firm (yes, buying your competitor!), and our favourite reason—growth!

 

 

That growth reason is one of the most important because the asset lending line of credit allows you to grow your business without the constraints you sometimes face with chartered bank commercial facilities.

 

 

MINIMUM /MAXIMUM SIZE OF ASSET-BASED CREDIT LINES

We're often asked about the ' size requirement ' in this type of business borrowing. Generally, we tell clients they qualify from a low of 250k up to facilities in millions of dollars.

There isn’t an upper limit as long as you have the total assets to back up the facility. ABL credit is very close to becoming ' mainstream' in Canada, and we think that’s a good thing.

 

 

  

SOME BASIC QUALIFICATION CRITERIA AROUND FULL-SERVICE ABL BUSINESS LINES OF CREDIT  

 

 

To qualify for an asset-based lending solution, businesses should be able to demonstrate good profit margins, which help support the financing costs.

 

A business with high leverage and low profit margins is generally not a good candidate for ABL.

 

Overall asset quality is also key, so accounts receivable and inventories should be constantly revolving - when fixed assets and other equipment or real estate equity are bundled into the facility, an appraisal might benefit both the owner and lender and demonstrate collateral value - 

 

The most liquid asset in the ABL facility is typically the business receivables - so stable or growing revenues are important -   ABL suits seasonal businesses that might have ' bulge requirements ' around cash flow needs based on issues such as seasonality or larger orders and contracts.

 

Typical reporting requirements to the asset-based lender include monthly income statements and balance sheets as well as up-to-date schedules of current assets and current liabilities.

 

 

 

A BRIDGE BACK TO TRADITIONAL BANK FINANCING?

 

 

Many companies utilize the ABL solution for a year or two as a bridge back to traditional bank cash flow financing -

 

Firms consider asset-backed financing because they don't meet bank qualifications regarding cash flow, profits, stability, and acceptable term debt levels.

 

 

Asset finance is considered a covenant-light structure given that traditional financial institutions focus on very specific levels of shareholder equity, a reasonable debt to equity, and the requirement to maintain certain financial ratios on the balance sheet and income statement -

 

While some covenants might exist in a larger ABL facility, they are often more flexible - Firms not meeting bank covenants frequently find themselves in the Special Loans section of bank credit facilities- with the word special being a bit of a misnomer as their loan has been called.

 

Bank financing for credit line facilities usually focuses on a maximum credit limit based on underwriting decisions made by commercial bank lenders. Abl solutions for credit lines focus on automatic facility increases as sales and assets grow.

 

That's why many firms in Canada tend to use asset-based credit lines as a bridge to other financings. This often means that the facility is used for a year or two, as we have mentioned -

 

Sometimes, this takes longer as the business owners work towards the more traditional financing that is recognized in Canada, i.e., our banks. Many are very comfortable with asset-based lending lines and choose to remain with ABL based on additional borrowing capability!

 

 

KEY  TAKEAWAYS

 

 

• Access to capital, when needed, forms the foundation of revolving credit's appeal, distinguishing it from traditional loans by eliminating reapplication processes.

 

• Flexible drawdown options enable businesses to borrow exactly what's required, creating significant cost-saving advantages compared to lump-sum financing.

 

• Interest accrues only on utilized funds, not the entire approved credit limit, substantially reducing financing costs during periods of lower capital needs.

 

• Revolving structures automatically renew available credit as repayments occur, establishing a sustainable financing cycle without requiring new applications.

 

• Credit utilization ratios impact both your business credit score and future borrowing capacity, making strategic use crucial for long-term financial health.

 

• Collateral requirements vary widely between lenders, ranging from fully unsecured options for established businesses to asset-backed lines for startups.

 

• Annual review processes determine continued eligibility, presenting opportunities to negotiate improved terms or increased limits based on responsible usage.

 

• Covenants within agreements may restrict certain business activities, requiring careful review of terms before commitment to avoid operational limitations.

 

 

  

CONCLUSION - ABL FINANCING SOLUTIONS

 

  

What is the best financing solution for your business?

 

Ensure you know your Canadian business financing options and talk to the 7 Park Avenue Financial team. They can help you with your decision-making process, which most companies may struggle with.

 

As we said, the bottom line is ' ASSETS ', so if your firm has them, consider Canada's newest form of business financing, the ABL REVOLVER, whether you're looking for something new or an alternative to your current situation.

 

Sometimes, you're focused on a business turnaround, and ABL facilities are a solid interim option.

 

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with your total financing needs regarding a business credit line.

 

 

  

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION 

 

What is an asset-based financing line of credit?

The Asset-based loan (ABL) credit facility is an asset-based loan solution. It is a catch-all term for financing that allows a business with substantial assets to finance corporate assets for additional operating cash flow. These assets include accounts receivable, inventory, and equipment.

With some differences, ABLs secured by accounts receivable work like revolving lines of credit, as the credit agreement is a secured facility unlined by bank line credit facilities or term loans. Cash flows generated from the business ensure excess cash generated by monetizing assets, which allows for the company's day-to-day funding. Eligible receivables are often the most significant part of the facility, and financial covenants to eliminate credit risk are often more flexible than traditional bank funding.