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We're sometimes reminded of the old bank joke concerning the sign on the bank window that says 'We can loan you money to get completely out of debt'...! Anyway... sometimes achieving the business financing you need isn’t always about debt. We're talking in this instance about a new paradigm shift ' in business lines of credit - namely ABL asset finance financing.
A paradigm shift is defined as 'acceptance by a majority of a changed belief or attitude or way of doing things'. That’s why we couldn't think of a better way to describe why ABL asset based lines of credit might be the solution for your business financing needs.
Can we all agree that it has been more challenging for Canadian business owners and financial managers to access the commercial line of credit financing they need to grow or simply survive in their business? Often times an ABL facility can be the solution that becomes what we could call a 'double whammy' - it clears up a lot of current challenges and then focuses on the financing to grow your company.
What could those current challenges be then? It might be converting some senior secured debt into part of your new revolving credit facility, of paying off any arrears that you have with either suppliers or the big guy... aka Canada Revenue Agency!
ABL asset financing is a non-bank asset based line of credit that becomes your new 'revolver' line of credit. Typical facilities secure receivables, inventory, and in some cases can include fixed assets and real estate as part of your facility. That’s a powerful combination as you can imagine.
So where does our paradigm shift come into play? Simply that whatever you may have thought about a Canadian commercial bank line of credit somewhat goes away in the context of ABL asset finance. Receivables tend to be margined at 90% (for A/R under 90 days) and healthy advances on inventory based on its real-world values now - something that has been often difficult to achieve in the past for many Canadian firms.
And what about the credit criteria used to approve such facilities. Suffice to say that they are different! Companies that are growing quickly but only just recently profitable or perhaps who had a loss last year are still 100% eligible for ABL financing. In many instances even the issue of 'concentration' can be dealt with...namely your reliance on one or just a few customers for a large portion of your firm’s revenues.
The paradigm shift for these newer business lines of credit in Canada is significant. Your assets, the size of the facility (facilities range from 250k to the tens of millions of dollars) or the industry you operate in can effectively be dealt with in asset based lines of credit.
Probably the most important benefit of this type of financing for Canadian firms is their ability to satisfy day to day working capital and cash flow needs while at the same time being able to satisfy order demand for their clients.
In many cases, Canadian small and medium-sized firms are financed almost totally by the owners, in effect self-financing but limiting growth. ABL non-bank financing provides an all-inclusive facility to address daily and long term needs; it's as simple as that.
If your firm has good management, growing sales, and the ability to produce good products and services while at the same time maintaining good financial statements on costs, asset quality, etc. you are clearly a candidate for the new paradigm shift in Canadian financing.
Speak to a trusted, credible and experienced Canadian business financing advisor on why it might be time for you to seriously consider the new paradigm shift in business financing - asset based lines of credit.
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