Financing a Turnaround: Strategic Funding Solutions for Canadian Businesses | 7 Park Avenue Financial

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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

"In business, turnarounds are not about avoiding failure—they're about recommitting to success with greater wisdom and transformed operations. The financing is merely the bridge between those two realities." — Warren Buffett

TURNAROUND FINANCE SOLUTIONS / BUSINESS TURNAROUND FUNDING

An asset-based line of credit is an excellent strategy for any firm considering viable turnaround financing options. This finance strategy is also an excellent way to assist a firm in understanding its underlying problems in the search for access to capital.

From Crisis to Comeback: The Turnaround Financing Solution

Is your business facing insolvency? Cash flow shortages and mounting debts can transform a once-thriving enterprise into a sinking ship overnight. The anxiety of watching your life's work disintegrate is overwhelming.

Let the 7 Park Avenue Financial team show you how Turnaround financing offers specialized capital solutions specifically for distressed businesses, providing the funds and strategic guidance needed to navigate crisis to sustainable recovery.

WHAT WARNING SIGNS INDICATE A BUSINESS NEEDS  TURNAROUND FINANCING

Warning signs indicating a business needs turnaround financing include:

Persistent cash flow shortages

Increasing accounts payable aging

Declining profit margins

Maxed out credit facilities

Supplier demands for COD terms

Tax arrears

Inability to meet payroll obligations

Additional red flags involve reduced inventory levels affecting sales, customers switching to competitors, key employee departures, and accumulated deferred maintenance affecting operations.

How does turnaround financing differ between small businesses and larger corporations?

Turnaround financing differs between small businesses and larger corporations in several fundamental ways:

• Small businesses typically rely more heavily on secured asset-based lending
• Larger corporations often access debtor-in-possession financing unavailable to smaller entities
• Small business turnarounds frequently require personal guarantees from owners
• Corporate turnarounds more commonly involve creditor committees and formal restructuring
• Small business financing sources are often regional specialty lenders
• Larger corporate turnarounds attract institutional investors and specialized funds
• Documentation requirements scale dramatically with organizational size
• Regulatory considerations increase significantly for larger entities

WHEN SHOULD YOU CONSIDER AN ASSET-BASED CREDIT LINE 

An Asset-based business credit solution, commonly called an 'ABL' arrangement, can be instituted even if the company is not profitable or 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 company's key assets— 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.

TIMING IS CRITICAL TO IMPLEMENTING  A FINANCIAL SOLUTION

Many firms experience severe cash flow pressures prior to considering asset-based loans. Traditional working capital is shrinking, and sometimes external factors simply exacerbate the financial challenge. A business failure is likely if the business owner or financial executive does not take charge at this point.

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 the benefits and the risks of having significant bank lines.

Traditionally, these lines of credit are secured by receivables and inventory. Based on these facilities, businesses are told they can borrow up to a certain limit. The company submits detailed lists of a/r and inventory every month 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 for company-owned premises.

FINANCING INVENTORY

Banks have become much more cautious about inventory. That is simply because they don't understand each firm's inventory values and products and can't be expected to. Asset-based lenders have much more experience in these matters and are often inventory experts. Therefore, advances against inventory are much higher. Again, what does that do? Well, of course, it creates additional liquidity.

THE CREDIT LIMIT ON YOUR FACILITY

Many, if not most—oh, let's be honest, all banks—set maximum borrowing limits dependent on external factors such as other collateral they hold, perceived operating risk, and the value of shareholders' personal guarantees.

Bank operating lines are best when a firm is experiencing steady but not erratic growth and can comfortably operate within its borrowing limits as agreed upon with the bank.

When firms run into financial challenges, they, of course, have a contracting business. 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?

At this point, many businesses realize they are starting to default on bank covenants. Sales are often falling, and the balance sheet is highly leveraged.

It is tough for a business owner to both realize what is happening and, more challenging, correct the problem. Financial losses only augment the cash flow problem. Many companies aren't troubled by operating losses but have overexpanded. 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 for 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 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

At this time, the customer should focus 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 returning to profitability. We must add that the bank or the asset-based line of credit solution cannot adequately address a severe financial' death spiral'.

CASE  STUDY

When a manufacturer faced imminent closure after losing its primary customer , representing 60% of revenue, conventional lenders unanimously rejected their financing requests despite 22 years in business. A Specialized turnaround financing firm provided $1.75 million in asset-based lending against equipment and receivables, while implementing a 12-week stabilization plan.

The financing structure included:

• Interest-only payments for the first quarter
• Graduated repayment schedule aligned with new customer acquisition
• Working capital line secured against purchase orders
• Operational advisor with industry expertise at no additional cost

KEY  TAKEAWAYS

• Cash Flow Forecasting is the critical skill separating successful turnarounds from failures. Realistic projections demonstrate viability to potential lenders while creating accountability benchmarks for operational aspects of the business
• Lender Selection dramatically impacts turnaround success rates because specialized lenders bring industry-specific expertise alongside capital, guiding through the recovery journey.
• Asset Valuation often reveals hidden collateral possibilities overlooked by traditional financing methods, unlocking funding options when conventional approaches fail.
• Debt Restructuring creates room for operational improvements by extending payment terms and consolidating obligations into manageable structures.
• Negotiation Leverage increases substantially when businesses approach creditors with a professional turnaround plan backed by committed financing rather than desperate pleas.
• Milestone-Based Funding aligns the interests of business owners and turnaround financiers through structured capital releases tied to measurable achievements.

CONCLUSION - THE FINANCIAL TURNAROUND

The business owner and manager must recognize the current financial situation and address the required financing solution promptly and efficiently. The Asset-Based Line of Credit—ABL Lending can do that.

Call 7 Park Avenue Financial, 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 here at  7 Park Avenue Financial as your right financing partner in the restructuring financing process.

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