YOUR COMPANY IS LOOKING FOR BUSINESS FUNDING VIA A CREDIT FACILITY!
BUSINESS LINE OF CREDIT SOLUTIONS IN CANADA
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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Email: sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Business credit lines or, more specifically, the lack thereof! ... Can be a major business and growth challenge for Canadian companies.
WHY DO BUSINESSES NEED LINES OF CREDIT / ABL FINANCING
Top experts tell us a commercial line of credit is, in fact, a necessity for any business that sells on credit and has investments in one or either of receivables and inventory. ABL facilities compete with Canadian chartered bank facilities to satisfy the thirst for business credit via an asset-based loan. Let's dig in.
BUSINESS BORROWING VERSUS CONSUMER BORROWING NEEDS
It should go without saying that commercial credit facilities differ significantly from consumer borrowing. There the emphasis is on personal credit, payment history, credit reports and scores.
The business of commercial borrowing revolves typically around your own firm's lending practices to your accounts, as well as the peculiarities of your own business model/business cycle.
2 KEY ASPECTS OF CREDIT LINES
Credit lines for business really come down to two key areas -
How you are managing your assets
What type of commercial borrowing best suits your asset base.
2 KEY REASONS TO CONSIDER ABL FINANCE FOR LINES OF CREDIT
Canadian chartered bank credit line rates are currently at historical lows - so the ability to qualify and borrow against those rates is a win for any business. Businesses that seek out ' ABL ' (asset-based lending ') fall into two basic categories:
1. For a multitude of reasons, they don't qualify for bank facilities
2. They qualify for bank credit - but not for the amounts they need!
5 OTHER REASONS TO CONSIDER ASSET BASED BUSINESS CREDIT LINES
Businesses can also be considered for ABL lines by asset-based lenders if they are what the industry calls ' story credits. ' Conditions for story credits typically include:
1. Explosive growth that doesn't allow for ' traditional ' financing
2.Erratic profit and loss history
3.Turn around
4.Management buyout
5. Businesses that have had their bank loan called - they are in the so-called' Special Loans' category at the bank.
WHO ARE ASSET-BASED LENDERS?
Numerous types of ' ASSET BASED LENDING ' players exist in Canada, providing financing for companies that need funding. they range from divisions and subsidiaries of our banks, U.S.-owned commercial finance firms, Canadian finance companies focused solely on ABL lending, and... Sorry for making things more complicated... subsets of asset-based loans that focus on niches.
THERE ARE DIFFERENT SUBSETS OF ASSET BASED LENDING
Those ' subsets "? They include :
A/R financing / Accounts Receivable Confidential Factoring / Invoice factoring
Inventory finance solutions
Purchase Order Financing
SR&ED tax credit financing
Real estate bridge loans/ commercial mortgages
How do the Canadian business owner and financial manager choose ' wisely ' NOT ' randomly ' when seeking business credit lines?
HOW DOES AN ABL LINE WORK?
First, get comfortable with how asset-based lines of credit work. Typically they bundle your assets as collateral - accounts receivable, Inventory and Equipment values into one basic borrowing facility, and you borrow as you need from there. By the way, borrowing margins are more generous with ABL - receivables are margined typically at 90%, inventory anywhere from 30-70%. Financing the balance sheet effectively is what asset based finance is all about.
KEY POINTS TO REMEMBER WHEN CONSIDERING ABL LOANS
Also, ensure you deal with a firm you are comfortable with from a management and reputation perspective. Some ABL lenders are divisions of asset liquidation firms - and in the past, there have been examples of a focus on asset liquidation instead of client servicing via lending! Ensure also you're not paying monthly for borrowing facilities you are not using.
WHAT IS THE COST OF ABL FINANCING
Firms that consider bank ABL facilities sometimes have found those facilities not dissimilar from traditional bank credit. And while rates are (almost) always higher for ABL lines of credit that must be balanced against your ultimate access to capital - don't just focus on cost. The good news - ABL rates have tended to come down.
CONCLUSION
A proper revolving line of credit for small business delivers the working capital you need for your business. If you want to understand better what thousands of business owners have been talking about, i.e. ABL... seek out and speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in choosing wisely '.
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Stan Prokop
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