YOUR COMPANY IS LOOKING FOR BUSINESS CREDIT LINES!
HAVE YOU CONSIDERED ASSET BASED LENDING?
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
Suite 301
Oakville, Ontario
L6J 7J8
A Credit Line for Business. Occasionally a client will say to us ' Holy Cow ' I didn’t know that! It turns out ' that ' refers to the fact that it turns out a number of business owners/ financial managers don't know they have to choices in revolving credit facilities for their daily operations. One is the Canadian chartered bank solution; the other is the Asset-Based Credit solution, known simply by the term ' ABL' line of credit. Let's dig in.
WHY BUSINESS CREDIT LINES?
Canadian businesses use these lines for working capital and cash flow. This type of borrowing in effect fund your ' current assets ', typically A/R and inventory. Because no business in Canada runs on a straight line when it comes to the ups and downs of sales, collections, etc. credit lines address those ' bulges' in our businesses. It's short term borrowing via assets as collateral.
THERE ARE 2 SOLUTIONS FOR A BUSINESS CREDIT FACILITY
Two solutions, as we have noted become your ' choice' for the business credit line. The first is the Canadian chartered bank, the other is a non-bank commercial financing facility known as ' asset-based credit ‘. ' ABL ' as it is known grew out of the tremendous popularity of this type of financing in the United States, offering terms and conditions on financing that every business with sales and assets can meet!
HOW TO YOU COMPARE BANK AND ABL ASSET BASED LOANS
How do these facilities compare in price, which most clients focus on immediately? The reality - if your company is established, growing, has profits and a clean balance sheet and is of a decent size the costs of these two facilities are in effect 'neck in neck'. At this point, everyone wants your banking business and you're in charge of who gets it. Not a bad situation to be in.
FINANCING THE SMALL AND MEDIUM-SIZED ECONOMY IN CANADA
Unfortunately, we very rarely meet clients in the Canadian business financing landscape that have the ability to be 'driving the bus' when it comes to addressing financing needs. Of course, large private corporations, public companies and subsidiaries of multinationals have the option to demand the most facilities at the lowest cost. It just turns out that in Canada that seems to only cover 5% of the companies who need financing. That is where asset-based financing becomes a logical solution.
THE COST OF ABL FINANCING
Because of that ' size' breakdown ABL asset-based credit facilities tend to cost more. The reason couldn’t be simpler - it’s that the commercial finance firms offering this credit are in fact borrowing from banks... to lend to your firm! Interest rates are at all time lows and ABL's are more competitively priced than ever.
WHAT SIZE OF FACILITY QUALIFIES?
While any business can theoretically ( key word = theoretically '!) obtain a bank business credit line, secured or unsecured, the ABL credit line typically works best for facilities in excess of at least 250k. Upper limits can of course range into the millions and tens of millions.
ABL OFFERS HIGHER BORROWING POWER!
One key point in the choosing of which facility makes sense for your firm is the fact that asset based loan facility tends to, 99.9% of the time, create more borrowing power for your firm. Simply speaking receivables and inventory are margined higher, and you have the ability to throw your fixed assets into the mix, borrowing against their value when you need it.
CAN YOUR FIRM MEET BANK BUSINESS LINE OF CREDIT QUALIFICATIONS
When your firm is banked by a Canadian chartered bank a strong element of trust exists between your company and the bank. You’ve passed with flying colours the key requisites of a good commercial bank facility - profits, clean financials, healthy accounts receivable, good cash flow, and the ability to meet ratios and covenants required by our regulated bank system in Canada.
MONITORING ASSETS AND SALES
Many clients for whom we originate bank financing simply have to report annually, or in some cases monthly on their borrowing needs and financial results. The ABL lender is more generous, and, no surprise, more cautious. So while your borrowing ability increases you tend to be reporting more often on the asset values of your firm. In our experience, this just makes your firm a better ' manager of assets ' so that's hardly a bad thing. Note also that real estate and the equity your company has in that real estate can be used to margin even more borrowing power in your line of credit.
CONCLUSION
Whether you are a small business or a larger corporation - If you're uncertain about which business credit line works for your company seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with a credit line for business that makes sense for your company's borrowing needs.
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Stan Prokop
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