YOUR COMPANY IS LOOKING FOR BUSINESS CREDIT LINE FINANCING!
ASSET BASED LOANS IN CANADA - HOW ASSET BASED FINANCING WORKS!
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
An alternative business credit line financing strategy is an excellent solution for any firm that is considering viable turnaround options. This finance strategy is also an excellent way to assist a firm in understanding what some of its underlying problems are; let's explore an asset based lending strategy that can help your firm today in the best or toughest of times.
An asset-based line of credit / asset-based loan commonly referred to as an 'ABL' arrangement can be instituted even if the company is not profitable or in fact is experiencing financial duress. When it comes to commercial lending asset-based solutions may just be the answer to every challenge your firm might be currently facing.
ASSESSING THE NEED FOR AN ALTERNATIVE CREDIT LINE
Prior to considering an ABL many firms will find they are experiencing severe cash flow pressures. Traditional working capital is shrinking, and sometimes external factors to the business simply exacerbate the financial challenge. If the business owner or financial executive does not take charge at this point a business failure in fact is likely.
ASSET BASED LENDING VERSUS BANK CREDIT ALTERNATIVES
Many firms gravitate towards an ABL arrangement after their bank operating line of credit. Most business owners quickly realize both the benefits and the risk of having significant bank lines in place. Traditionally these lines of credit are secured by receivables and inventory. Businesses are told they can borrow up to a certain limit based on these facilities. Every month the company submits detailed lists of a/r and inventory and can borrow certain pre-agreed-upon limits against those assets.
ABL PROVIDES MORE LIQUSIITY AND ACCESS TO CAPITAL
Banks typically advance 75% of those receivables that are under 90 days. In asset-based lines of credit facilities that amount is often 90- 100% of receivables, creating immediate additional liquidity.
DOES YOUR FIRM HAVE AN INVENTORY COMPONENT IN CURRENT ASSETS?
Banks have become much more cautious on inventory, that is simply because they don't, and can't be expected, to understand each firm's inventory values and products. Asset-based lenders tend to have much more experience in these matters and are more often than not inventory experts. Therefore advances against inventory are much higher. Again, what does that do, well it of course creates additional liquidity. Important to know also that real estate can be bundled into any asset based credit facility.
BANKS FACILITIES ARE THE BEST TYPE OF FINANCING IF YOUR FIRM IS DOING VERY WELL
Many, if not most, oh, let's be honest, all banks set maximum borrowing limits that are dependent on other external factors such as other collateral they hold, perceived operating risk, and the value of personal guarantees of the shareholders.
Bank operating lines are best when a firm is experiencing steady, but not erratic growth, and when the firm can operate comfortably within its borrowing limits as agreed upon with the bank and accounts receivable inventory turns are excellent and fluctuating. Interest rates at Canadian chartered banks are low and financing is abundant if in fact, your firm qualifies.
When firms run into financial challenges they of course have a business that is contracting in many ways. Therefore borrowing against accounts receivable and inventory becomes limited, and the bills that need to be paid are of course paid with less cash available and on hand. It's all about new financing for the balance sheet!
It is at this point that many businesses realize they are starting to default on bank covenants. In many cases, for a variety of reasons, sales are falling.
DO YOU RECOGNIZE THESE SYMPTOMS FOR NEW BUSINESS CREDIT REQUIREMENTS?
It is very difficult for a business owner to both realize what is happening, and, more so of a challenge, correct the problem. Financial losses only augment the cash flow problem. Many companies in fact aren't troubled by operating losses but have simply over expanded. Business owners get into the mindset that if they are expanding, there can't be a problem! Most financial executives know that a company can fail not for lack of profit, but from lack of liquidity.
CONCLUSION
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your credit line and business capital needs.
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Stan Prokop
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