YOUR COMPANY IS LOOKING FOR AN
ASSET BASED BUSINESS LINE OF CREDIT!
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Financing & Cash flow are the biggest issues facing business 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
Direct Line - Phone = 416 319 5769
Asset Based Lenders offer innovative financial solutions that unlock the hidden value in a business's assets, providing critical working capital and growth opportunities.
Struggling to secure business financing? Discover how ABL Companies can transform your assets into immediate cash flow!
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Asset Based Lending and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Asset Based Lending: The ABL Line of Credit in Canada
Introduction to Asset Based Lending
The ABL line of credit in Canada. It’s the product of a Canadian business financing tool that replaces what business owners and managers know as the revolving business line of credit.
Asset-based financing is a financial solution that leverages a business's assets, such as accounts receivable and machinery, to secure loans. In the case of ABL, what is typically offered by ‘ the bank ‘is a product offered by commercial finance companies. Unknown to most, it’s also available at the bank, but we digress.
Speed Dating in Business Finance
Today, we're in SPEED DATING mode from a business perspective! It's that process of sitting down, learning some key information about someone ( in our case, ' something ' ), moving on, learning more, and then .. making a decision.
Strap yourself in and hang on! , as a lot of info is going to come at you pretty fast.
Key Features of ABL Facilities and Accounts Receivable
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The ABL facility is an asset-based line that functions as a revolving business line of credit. It uses all your business assets to secure the line of credit ‘ loan ‘—it’s not a loan but a monetization of your assets.
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Assets financed in your line of credit are typically receivables, inventory, and equipment but can also include real estate, your ‘ rolling stock, ‘ etc.
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Asset-based business lines of credit are getting more popular daily; they are the bank alternative.
Who Uses ABL Facilities?
Who uses ABL facilities? I'm glad you asked!
Startups, some of the largest corporations in Canada, high growth companies, public firms, private companies, and companies in SPECIAL LOANS at their bank, companies in turnaround mode.
Asset-based lenders specialize in financing against various types of collateral, mainly focusing on accounts receivable and inventory. The bottom line is that we can’t think of a firm that isn’t eligible in some manner.
Advantages of ABL Business Credit Lines for Working Capital
Key advantages of the ABL business credit line include the ability to borrow much more—we often see 100% increases in lending power. It works if you have business assets and don’t want to or can’t add long-term equity capital or debt.
Additionally, ABL business credit lines offer flexible funding, allowing companies to unlock capital tied up in their assets. This provides quick and customizable working capital solutions that can grow alongside the business's needs.
Reporting Requirements
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Reporting on your business credit facility is more stringent - so you need to be able to prepare ongoing reports on your receivables, payables, inventories, monthly financial stats, etc. If you can't do that already, we suggest you have some other problems.
Asset Monetization in ABL
Asset-based lending typically monetizes a company's assets, such as receivables at 90%, inventory between 25-75%, and current values of your equipment and other assets. Expect an appraisal when it comes to other assets.
Key Takeaways
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Asset-based lending leverages business assets as collateral for financing.
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Receivables and inventory form the primary basis for most ABL facilities.
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Borrowing capacity increases proportionally with the growth of eligible assets.
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Flexible credit limits adjust dynamically based on current asset values.
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Regular reporting and monitoring ensure accurate valuation of collateralized assets.
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ABL offers higher advance rates compared to traditional bank lines of credit.
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Companies facing rapid growth or seasonal fluctuations benefit significantly from ABL.
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Asset-based loans typically carry lower interest rates than unsecured financing options.
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Lenders focus more on collateral quality than on the borrower’s credit history.
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ABL structures can accommodate various industries and business lifecycle stages.
Conclusion
That’s our business ‘speed dating’ recap on the ABL business line of credit.
Effective working capital management through asset-based lending options can release capital tied up in assets, providing the necessary funds for operations and growth. It’s up to you, the business owner or financial manager, to now ‘pick your partner’ when choosing the right business line of credit for your firm.
Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can assist you with asset-based financing solutions for your business credit needs.
FAQ
How do asset based lenders differ from traditional banks?
Asset-based Lending Companies focus on asset lending values on business assets rather than your credit scores, offering more flexible financing options and higher borrowing limits based on collateral as compared to an unsecured loan from a bank.
What types of assets can be used to secure financing from Asset Based Lending Companies?
Asset-based Lending companies typically consider accounts receivable, inventory, equipment, and sometimes real estate as collateral for financing. Concerning the portion of Fixed assets facility limits, they are sometimes based on appraisals.
How quickly can a business obtain funding from Asset Based Lending Companies?
Asset Based Lending Companies often provide faster funding than traditional banks, with some able to approve and disburse funds within days of application.
Can Asset-Based Lending Companies help businesses with less-than-perfect credit?
Yes, ABL lenders primarily focus on asset value, making them a viable option for businesses with challenging credit histories but strong assets.
How does Asset Based Lending impact a company’s growth potential?
By providing access to larger credit lines that grow with your business assets, Asset Based Lending Companies can significantly enhance a company’s ability to fund expansion and seize growth opportunities.
What are the typical fees associated with Asset Based Lending?
Asset Based Lending fees often include interest charges, audit fees, and due diligence costs. Rates vary based on the lender, loan size, and risk profile.
How does the underwriting process work for Asset Based Lending?
The underwriting process involves thoroughly assessing the borrower’s assets, including on-site inspections, financial statement analysis, and collateral valuation.
Are there industry restrictions for Asset Based Lending?
While asset-based lending is available across many sectors, some industries with highly specialized or perishable inventory may face restrictions or modified terms.
What happens if the value of collateralized assets decreases?
If asset values decline, borrowing capacity may be reduced. Lenders typically require regular reporting to monitor asset values and adjust credit limits accordingly.
Can startups benefit from Asset Based Lending?
Some asset-based loan firms work with startups, particularly those with tangible assets or strong accounts receivable. However, terms may be more conservative than for established businesses.
What key factors do asset-based lending companies consider when evaluating a potential borrower?
Asset-based Lending firms assess the quality and liquidity of collateralized assets, the borrower’s cash flow, industry dynamics, and management expertise. They also evaluate the company’s financial reporting capabilities and overall business stability.
How does Asset Based Lending affect a company’s balance sheet?
Asset-based Lending is typically structured as a revolving line of credit, which appears as a current liability on the balance sheet. This can improve financial ratios compared to long-term debt, potentially enhancing the company’s perceived financial health.
What are the long-term implications of using asset-based lending for business growth?
Asset Based Lending can provide the necessary capital for expansion without diluting ownership through equity financing. It allows businesses to leverage existing assets effectively, potentially leading to accelerated growth, increased market share, and improved profitability.
What role does commercial real estate play in asset-based lending?
Commercial real estate can be an ancillary asset that enhances liquidity in asset-based lending scenarios rather than being the main collateral for loans. This can provide additional security and potentially more significant borrowing limits.
What are the differences between credit and term loans and asset-based loans?
Credit and term loans are suitable for asset-rich companies looking for collateral-based loans. They can accommodate both new businesses exploring this type of financing and established firms with variable cash flow needs. On the other hand, asset-based loans leverage the borrower's assets to provide greater access to capital and more favourable terms.
How do term loans operate in the context of asset-based loans?
Term loans in asset-based lending allow companies to borrow against the appraised value of their machinery with a repayment structure over a designated period. They are suitable for businesses with asset-rich balance sheets that require collateral loans.
What are the differences between unsecured loans and asset-based loans?
Unlike unsecured loans, which do not require collateral, asset-based loans leverage the borrower's assets to provide greater access to capital and more favourable terms. Businesses can typically secure larger amounts through secured loans.
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