YOUR COMPANY IS LOOKING FOR A BUSINESS LINE
OF CREDIT TO FACILITATE YOUR TURNAROUND STRATEGY!
CAN AN ASSET BASED LINE OF CREDIT SAVE YOUR BUSINESS!
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
TURNAROUND FINANCE SOLUTIONS / BUSINESS TURNAROUND FUNDING
Asset based line of credit? It’s an excellent strategy for any firm that is considering viable turnaround financing options. This finance strategy is also an excellent way to assist a firm in understanding what some of its underlying problems are in the search for access to capital.
WHEN SHOULD YOU CONSIDER AN ASSET BASED CREDIT LINE
An Asset-based business credit solution, commonly referred to as an 'ABL' arrangement, can be instituted even if the company is not profitable or in fact, is experiencing financial duress. These solutions originated in the united states and are becoming increasingly popular in Canada.
WHAT IS ASSET BASED LENDING IN CORPORATE TURNAROUNDS
The asset-based business line of credit is a business credit line secured by the key assets of the company - typically accounts receivable, inventories, fixed assets and potentially other assets including company-owned real estate. A borrowing facility is set up to allow the firm to borrow on an ongoing basis based on formulas developed by the ABL lender.
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TIMING IS CRITICAL TO IMPLEMENTING A FINANCIAL SOLUTION
Prior to considering asset based loans 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.
THE ADVANTAGES OF A BUSINESS LINES OF CREDIT
Many firms gravitate towards an ABL arrangement after their bank operating line of credit. Most business owners quickly realize both the benefits and the risks 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.
A KEY DIFFERENCE IN COMPARING BANK CREDIT VERSUS ABL CREDIT
Banks typically advance 75% of accounts receivable that are under 90 days. In asset-based loan solutions that amount is often 90- 100% of receivables, creating immediate additional liquidity. In asset based loan facilities real estate equity can also be a part of your credit line when it comes to company-owned premises.
FINANCING INVENTORY
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.
THE CREDIT LIMIT ON YOUR FACILITY
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.
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.
ARE YOUR BANK COVENANTS BREACHED?
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 and the balance sheet is highly leveraged.
It is very difficult for a business owner to both realize what is happening, and, more 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.
TIME FOR A CHANGE TO A CREDIT LINE THAT WORKS!
The time to consider an asset based line of credit is probably right now. The customer's bank either has or is reviewing its options relative to collateral and security arrangements. The bank will start to take measures to ensure it gets paid in full - this typically includes reducing operating lines of credit, formally calling a loan and setting new deadlines for the customer to 'right' the business, or exit the bank relationship. It's more important than ever at this time to ensure your financial statements are up to date and that you can provide the asset-based lender with proper ageings of receivables, inventory and accounts payable.
IF YOU HAVE SALES AND ASSETS 'ABL' LENDING WORKS
It is at this time the customer should be focusing on alternative lending sources such as the asset based line of credit with non-bank finance firms. This facility improves liquidity, places less reliance on external guarantees and collateral, and can operate with a firm that is getting back on its track to profitability. We hasten to add that a severe financial 'death spiral' cannot be properly addressed by either the bank or the asset based line of credit solution.
CONCLUSION - THE FINANCIAL TURNAROUND
The business owner and manager must recognize the current financial situation, and address that required financing solution in a prompt and efficient manner as possible. The Asset-Based Line Of Credit – aka ‘ ABL Lending’ can do that. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your borrowing needs. Flexible financing solutions are what we are about at 7 Park Avenue Financial as your right financing partner.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is turnaround financing?
Turnaround financing is business loan financing that secured a company's assets or cash flows in order to effect a financial recovery for the business - Using the right financing partner or turnaround advisor is key to successful a successful trnaround strategy .
Turarounds in some cases might invoice debtor in possession financing if a coapny has declaring bankruptcy or is in a receivership situation - necessitating a strategic plan around the indidual circumstances of the company/ndustry.
A company turnaround will often require an operation turnaround as part of the turnaroud strategy. Business turnarounds require extensive experience in refinancing with a goal to returning the company to profits via the right combination of debt, equity and cost reduction.
What is a turnaround strategy?
A proper turnaround strategy is the ability of a company to address negative changes in financial performance . A proper business plan will often reflect the clear path to recovery.
What is the difference between turnaround and restructuring?
A business turn around will often happen prior to any formal solvency fling while restructuring typically is the process around saving a business that is insolvent or in serious financial distress or declared bankruptcy and needs extensive experience around these situations.
What are the essentials of a turnaround strategy?
There are numerous parts to a turnaround strategy - from an operational point of view issues around proper control and crisis management are key - in some cases that might mean new management - From a financial perspective the turnaround will often involve cost assessments, cash flow management around working capital needs and the potential sale or refinancing of assets.
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