YOUR COMPANY IS LOOKING FOR ABL FUNDING VIA A BUSINESS
CREDIT LINE!
THE ASSET BASED LOAN / ABL REVOLVER IN CANADA / COMMERCIAL FINANCE SUCCESS!
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing businesses today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
ASSET BASED LENDING CREDIT FACILITIES IN CANADA
An ABL credit facility. Could this be the solution to business bank loans your firm has been seeking for your revolving credit needs? We believe the weight of evidence strongly suggests you take a look at one of Canada's newer methods of financing business commercial credit lines.
WHAT IS AN ABL CREDIT FACILITY?
An ABl Loan is a revolving credit facility and a specialized type of business line of credit or term loan product for Canadian Businesses - Instead of relying on the financial strength and cash flows and profits of the business the financing structure is based on the collateral value of all the business assets.
HOW DOES AN ABL FACILITY WORK?
Asset based facilities are granted to the borrower secured by business collateral - The typical collateral in such facilities includes inventories, accounts receivable, fixed assets/equipment, intellectual property, and commercial real estate if the business owns the property. These transactions are business-based, and not consumer finance products.
So what in fact do we think you need to know about this type of asset borrowing facility? Well, you asked for it, so here goes.
ABL FACILITY FINANCING IS AN ALTERNATIVE TO BANK LOANS
- The ABL (asset-based lending) credit line is used by many Canadian businesses as an alternative to Canadian chartered bank lines of credit - Although on large deals ABL banking is available and an administrative agent might be involved -
ABL FINANCE LENDING IS RELATIVELY NEW TO CANADA
While this method of financing your business is not as widely known yet some of Canada's largest corporations have used it, and continue to use it, for years.
Standard requirements for an ABL cash line of credit facility include such items as properly prepared and up-to-date financial statements, bank statements, tax returns and details on any existing secured creditors. Collateral descriptions as well as aged accounts receivables and accounts payable are standard business lenders' requests by asset-based lending banks and commercial non-bank ABL lenders.
ABL ASSET-BASED LOANS ARE ALL ABOUT .. THE ASSETS! - HOW ABL LOANS WORK
- The main advantage of the facility is the fact that it’s based on all the assets of your company - those assets include receivables, inventory, equipment, tax credits and real estate. All of those assets are more aggressively margined than at a bank, so your firm has the ability to in many cases double its borrowing power and working capital funding. Yes, we said ' double '.
ASSET BASED FINANCING LEVERAGES CASH FLOW FROM SALES REVENUES
- Canadian business owners and financial managers look to this method of financing for a variety of reasons. We have already mentioned increased daily borrowing power, but other reasons include pricing, the inability to achieve the bank financing you need, and the ability to leverage other assets rather than traditional bank accounts receivable and inventory financing.
EVERY TYPE OF BUSINESS CAN ACCESS ASSET LOAN FINANCING
- Almost any firm can utilize an ABL Credit facility. Types of firms that typically consider this as an alternative to business bank loans include start-ups, high-growth firms, companies in ' special loans ', and firms in turnaround or restructure mode. You can be a very 'normal' company or a firm that has issues and challenges. Public and private companies alike have the ability to access asset-based lending, as well as major retailers.
BORROWERS SHOULD BE PREPARED TO HAVE UPDATED FINANCIALS, ASSET LISTS, AGED PAYABLES/RECEIVABLES, ETC
- Companies utilizing this type of line of credit can be expected to report more stringently on their assets - but it’s simply the basics, ie aged receivables, inventory lists, equipment lists, and aged payables as well as your monthly balance sheet and income statement. We don’t think any of those should surprise the business owner.
- The margins on a typical ABL funding scenario are usually 90% for accounts receivable, 30-70% for inventory (it depends!), and the appraised value of equipment, real estate, rolling stock, etc.
ABL IS COVENANT LIGHT!
- Covenants and ratios typically demanded by our Chartered banks in their wisdom don't normally apply to asset-based lines of borrowing. The full focus is on the value of your business assets and their turnover. High growth, viewed by commercial bankers as a minus, not a plus, is welcomed in an ABL funding environment. The borrower and lender will determine the best answer around 'abl facility vs term loan ' and which is the optimal structure for the financing.
HOW MUCH DOES ABL COST?
Asset-based loans are priced on various factors surrounding overall deal facility size, quality of the collateral, type of lender and general creditworthiness of the company and industry. Certain large transactions will often enhance productivity and are competitive with bank financing but typical rates are in the 8-15% range regarding interest rates.
CONCLUSION - ABL LOANS AND THE RISE OF ABL FINANCING IN CANADA
When considering an abl credit agreement numerous factors will come into play but at the end of the day, it's all about sales revenues and collateral, as well as a financial covenant if one is imposed under the security agreement and borrowing base availability under the term sheet - ABL agreements will always have less monitoring by the lender as long as the company can provide up-to-date sales and financial statements for assets that are eligible under the credit agreement.
So, how was your visit through the portal into a new world of asset-based commercial revolving credit facilities? Not always a long-term solution, many firms utilize this method of Canadian business financing as a bridge back to traditional finance solutions. Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with negotiating tips in determining if your focus on business bank loans should instead be on an ABL credit facility.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK /MORE INFORMATION
HOW DO YOU GET A BUSINESS LOAN FROM A BANK?
Borrowers from traditional banks in Canada should be prepared to provide key documents around a business application for credit, relevant financial statements from a year-end and interim perspective, bank statements, proof of incorporation and personal financial information on the owners - including good personal credit scores.
