YOUR COMPANY IS LOOKING FOR AN ABL LOAN FACILITY
CANADIAN BUSINESS FINANCING ASSET BASED BUSINESS
LINE OF CREDIT!
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
ABL Loan Facility cover-up? It's probably just us, but it sure seems that the Asset-based loan business credit line facility is still somewhat of a best-kept secret in town in Canadian Business FInancing - and we do not understand why.
HOW DOES ASSET BASED LENDERS FILL THE BUSINESS FINANCE VOID IN CANADA
Cover up notwithstanding, let's take a look at how asset-based lending is filling one of the biggest voids in Canadian corporate finance - the ability of small, mid-market and even larger corporations, public and private, to secure business lines of credit that meet their working capital financing needs.
THE ABL LOAN IS TYPICALLY A REVOLVING LINE OF CREDIT
Although clients and everyone else, including us use the term ' loan ' the ABL facility is simply a revolving credit line secured by assets of your company. Those assets can vary in size and mix, but they typically include receivables, inventory, fixed assets, and on occasion, real estate.
BALANCE SHEET ASSETS DRIVE ABL LIQUIDITY
The primary focus and driver of the ABL are your current assets, and they would typically be A/R, inventories. Those two seem to drive the majority of asset-based financings in Canada when it comes to funding working capital .
ABL DELIVERS MORE BORROWING POWER THAN BANK FACILITIES
The good thing about asset-based lenders and their credit facilities is that a business owner or financial manager knows the % margin levels on accounts receivable and inventory upfront and therefore also on an ongoing basis. In ABL lending A/R is margined at 90% typically, which is 15% more than commercial bank financing in Canada.
UNDERSTANDING AND FINANCING THE INVENTORY COMPONENT OF ABL
Inventory is always another question, and is analyzed separately on its own merits relative to your product and the different components of any inventory cycle, ie raw materials; work in process (‘WIP’) and finished goods. As an ABL lender better understands your business and operating cycle and quality of assets/clients you'll find your borrowing power ' increases ‘, or solutions are put in place to handle ' bulges' that come with asset based loans.
ABL HELPS IN ALL BUSINESS CREDIT CATEGORIES
The beauty of asset-based lines of credit is that they serve a broad number of situations. And those situations? They include startups, fast-growing firms, turnaround situations, high growth scenarios, and dare we say it, even firms that are in distress or in the midst of bankruptcy or debtor in possession scenarios. Talk about a catch-all! We feel it's important to point out though that ABL financing is not to be viewed as a ' lender of last resort ' / 'when the bank says no' scenario. It’s simply a viable alternative to Canada's mainstay in commercial business credit lines, our Canadian chartered banks. Oh, btw! Some of Canada’s largest and most successful corporations and retailers use this type of facility to finance the entire business over the long term.
DO CANADIAN BANKS OFFER ABL FACILITIES?
And would the banks agree with us? It's a resounding yes because most of them have small boutique divisions within their banks with small ABL teams that in a way almost compete internally for transactions. Hard to believe. Trust us; we've been in those hallowed halls of bank due diligence.
CONCLUSION
We're not saying every aspect of ABL business lines of credit is a cakewalk. Most of the time ( not always !) it's more expensive, and you’ll be reporting more on asset quality and turnover regarding aged account receivable, inventory lists, a/p summaries, etc. But when you balance all that out against more liquidity and cash flow that comes sooner, quicker, faster that becomes a very positive trade-off. So, you decide, but we’re forgiving ourselves for thinking that the ABL financing credit facility is a cover-up on a good thing. We’re just trying to find the culprits. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your Asset Finance business line credit needs.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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