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ASSET BASED LENDING / ASSET BASED LOANS ARE HERE
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Financing & Cash flow are the biggest issues facing business today
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An ABL asset financing business credit facility. Is it really the ' rising star’ in Canadian business financing? We let clients be the judge, but let's look at some key facts around Canada's newest business credit revolver via the asset based lending solution.
ABL FACILITIES COMPETE WITH BANKS
As a general rule, we can say that asset based lending ' ABL ' facilities compete with Canada's chartered banks when it comes to business credit. (There's more than a bit of irony there because many of the Canadian banks have recognized that and set up small boutique divisions within their bank to offer the same service that ' regular ‘ banking does !) But we digress...
Canadian business owners and financial managers are famous for criticizing the Canadian banking system when it comes to access to capital. We're reminded of a U.S. comedians line ' before you criticize someone, walk a mile in their shoes, that way you're a mile away and at least you have their shoes'! From our part no one admires the Canadian banking system more than us... one simply has to accept the limitations that have made them the strongest banks in the world. They also brought the asset based loan solution to Canada years back, delivering working capital solutions to companies who need it most .
WHAT TO ASSET BASED LENDERS DO?
So why then does a non-bank asset based line of credit work when a Canadian firm can't access the amount and type of financing it needs. The answer to that is quite powerful. It’s that asset-based lending providers deliver on :
Accounts Receivable financing
High-risk financing, the debtor in possession/bankruptcy financing
Acquisition financing
Turnaround finance
Growth finance
Non-bank asset based business credit lines
Real estate bridge financing
ABL FINANCES YOUR COMPANY IN ANY STAGE OR GROWTH OR CHALLENGE
The benefit to consider such financing is that it pretty well covers all Canadian industries, and, as importantly, no matter what stage they are in, i.e. start-up, growth, or dire straits! By the way, out of those three growth is our favourite!! When the growth in sales requires further investment in accounts receivable and other assets ABL delivers business line of credit facilities. There are a number of different, can we call them 'flavours’ of an ABL facility & asset financing business credit lines. We could call these facilities a 'hybrid ' in effect.
OTHER BENEFITS OF ASSET BASED FINANCING
There are some other ' not ' so obvious benefits to this type of business credit facility. Financing costs under an ABL are of course covered by pre-tax dollars. This is not an equity play! Different rate structures are available to the Canadian business owner. In some cases ABL rates are ' lower ' thank banks - we've seen that often.
THE COST OF ABL
In general, rates are higher though on this type of asset based loan and based on the overall credit profile. Facilities are generally open, although some asset-based lenders might insist, or request a minimum term of 1 year or more. Finally, asset-based business credit lines simply monetize your assets for more liquidity than a Canadian chartered bank would. This is not term financing - it's business liquidity based on your current assets on the balance sheet.
CONCLUSION
Intrigued? Want to investigate the new ' rising star ' in Canadian business finance - Asset based lending? Speak to a trusted, credible and experienced Canadian business financing advisor on why this unique mechanism might just be the solution you're looking for.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2020
