YOUR COMPANY IS LOOKING FOR BUSINESS CREDIT LINE FINANCING!
A REVOLVING ABL CREDIT FACILITY LINE OF CREDIT THAT WORKS FOR YOU!
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 - email@example.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Bank credit facilities? Have you been to business credit line school yet? After talking to clients about their financing challenges it's safe to say they are hoping to attend, and one of those reasons is the credit facility known as a revolving ABL line.
IS THERE AN ALTERNATIVE TO A BANK LINE OF CREDIT
Did you know there's an alternative to the commercial bank business line of credit? It is known by various terms, the simpler is the' ABL Facility ', or asset-based line. An old mentor of ours here at 7 Park Avenue Financial advises that ‘tuition is very high in the school of experience', so let’s share some key facts and knowledge in this critical area of business credit in Canada.
TWO MAJOR DIFFERENCES IN NON-BANK CREDIT LINES VERSUS BANK FINANCING
This borrowing credit facility, non-bank in nature is a solid alternative to those flexible and low-cost commercial lines of credit offered by our Canadian banks. The two major differences :
1.More costly but easier to get given bank credit risk policy/regulation
2.In many cases borrowing power & credit availability can be increased anywhere from 50-100%.
THE FOCUS IS ON ASSETS - NOT RATIOS AND COVENANTS AND PERSONAL GUARANTEES
Clients we talk to always focus on the basics - they are ok with an initial explanation to get them started on a business borrowing facility that in most cases they have never even heard of. So the short explanation is that the non-bank ABL lender focuses on your assets in the business, versus your cash flow coverage and equity ratios that are of prime importance to lenders in the banking system.
THE KEY SIMILARITY IN CANADIAN BANKS AND ASSET BASED LENDING LINES OF CREDIT
The main similarity between Canadian banks and ABL finance lines of credit is that they are typically secured by receivables and inventory. The asset-based credit revolver often also adds in fixed assets which are treated in a manner similar to A/R and inventories - i.e. you can borrow against them on an ongoing basis.
ESTABLISHING THE BORROWING BASE CERTIFICATE FOR YOUR BORROWING POWER
Both banks and the ABL lender use standard borrowing base information to determine how much you can borrow at any given time. It's really a function of your balance sheet assets at the end of the month. Very typical ABL advances are 90% on accounts receivable, and anywhere from 30-70% on inventories. Borrowing for working capital for liquidity on equipment, under the ABL scenario, requires an agreed-upon valuation of the assets in question for your revolving credit agreement to function properly.
HOW DO NON BANK CREDIT LINES WORK ON A DAILY BASIS?
We forgive the business client looking to understand how ABL provides financing vis a vis how their normal day to day banking fits in. The simple answer? It's that you keep your regular bank account set up - funds are deposited as you need them under ABL borrowing. Receipts are placed into a separate account that is created at the bank for your business - this account with your receipts offsets your borrowing.
REVOLVING CREDIT LINES DOES NOT ADD LONG TERM DEBT TO THE BALANCE SHEET
Remember also that neither bank borrowing nor monetizing assets via ABL credit lines add a term loan or debt to your balance sheet. Your firm is simply cash flowing current assets. It is critical to focus on the fact that both bank and ABL lending simply provide you with quick access to cash. We can say the Abl facility, as opposed to the bank has no real upside limit - as you grow sales and assets such as A/R your business line of credit grows with you. Banks by their nature and history and practice tend to run these facilities on set limits with annual reviews .
WHAT DOES AN ABL LOAN / LINE OF CREDIT COST
Pricing on bank and ABL lines is always a key topic of focus for the Canadian borrower. While the majority of asset-based lines of credit are more expensive it’s important to remember that you use this liquidity from ABL to grow. You are no longer banking your clients - you're using your receivables to achieve a higher return on investment via better asset turnover. And at the risk of being too obvious you are not always going to be approved for the amount you require under a commercial Canadian chartered bank facility - your odds of approval, for liquidity needs, are much better in an asset-based line of credit.
Has the ABL credit line turned traditional bank borrowing revolving line of credit facilities on its side from a short term financing perspective ? There's certainly a case to be made for that. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in differentiating the difference and benefits of various business credit line options.
Click here for the business finance track record of 7 Park Avenue Financial
7 Park Avenue Financial/Copyright/2020/Rights Reserved