YOUR COMPANY IS LOOKING FOR ABL ASSET-BASED FINANCING!
Revolutionize Your Cash Flow with Asset Based Solutions
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?
CONTACT US ! - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
"Asset Based Finance revolutionizes the way Canadian firms access capital, offering a lifeline where traditional banking leaves gaps."
"Unlock your company's potential with assets you already own."
The Power of Asset Based Lending
Introduction to ABL: A Revolution in Business Financing
So, which is it? We're big proponents of ABL asset based finance in Canada. So once in a while, a client pops the question. What's the question? It's 'Is there any downside to asset based financing for a Canadian firm?' Fair enough. ABL lending seems to have only good things attached to it in terms of the benefits. So about that downside...
Perception vs. Reality in ABL Financing
We often hear the term perception versus reality. In the mind of the perceiver, the perception is of course reality.
The world of ABL financing in Canada is in some ways fairly new. It's used by wholesalers, distributors, retailers, and manufacturers as an alternative to the commonly known 'bank operating line of credit'. One guesses that to be able to 'pan' something and express concerns about the downside that you have to know what you're talking about.
Understanding ABL Lending
In simple terms, ABL lending in the context we're talking about it is a revolving line of credit secured by the assets of your company. Those assets are most commonly A/R, and inventories, and in some cases, we can throw unencumbered fixed assets and real estate into the mix.
Again, simply speaking you borrow daily against the total value of all those assets once the asset value is agreed upon between yourself and the ABL lender. The 'covenant light structure ' of this type of financing is also of great appeal to borrowers looking to grow revenue for goods and services sold to their customer base.
Credit Quality Misconceptions
So, on to that perceived downside! Many business owners and financial managers make the assumption that their firm must have the same credit quality that Canadian chartered banks require - that being profits, clean balance sheets, owner guarantees, the necessity for outside collateral on occasion, etc.
Financing Cost / Interest Rates
Pricing. That is perceived by many clients as the downside to this newer method of financing Canadian business. So, again, perception, or reality?! The reality is as follows: larger asset-based lines of credit; particularly those over 3 Million dollars are priced ultra competitively with Canadian banks. In some cases, lower interest rates might be available!
Fees. That’s the other common complaint we occasionally hear about asset-based finance. Here's where we will give in a little bit to those naysayers, as yes, there are some miscellaneous fees associated with ABL lending. But those fees only are a bit larger when we're talking about those very large revolving facilities, and in that case, the pricing and access to more credit and working capital tend to offset any cost such as an appraisal fee, commitment fee, etc.
ABL Financing for Public and Private Companies
‘Our company is public' says a CFO. So we assume we can't access ABL revolver facilities?' Nothing can be further from the truth, as our ABL financing solution serves both private and publicly controlled companies, either on the TSX or Venture exchange in Canada. Even subsidiaries of U.S. companies by the way could qualify for asset based lines of credit. And in fact, we think shareholders of public companies would like the idea that asset based facilities tend to grow and provide ongoing capital as the firm grows.
Fast Approval
Finally, time to get approved and closed. Clients perceive ABL financing, perhaps because it’s different, as taking longer to close. If you have solid reporting, can talk intelligently about your business and are prepared to commit to a new lending relationship we don't think there is any more time involved versus a bank line of credit.
Key Takeaways
- Asset Based Finance (ABF) involves securing loans against company assets, such as accounts receivable, inventory, and sometimes fixed assets or real estate. This means businesses can borrow money based on the true face value of their tangible assets - ie increased cash flow
- Eligibility and Requirements: Unlike traditional loans that might require stringent credit checks, ABF looks at the value of the assets being financed. This makes it more accessible for businesses with valuable assets but less-than-perfect financial statements.
- Costs and Benefits: ABF can be more expensive than traditional financing due to higher interest rates and fees. However, it provides crucial liquidity for companies that might not otherwise qualify for financing.
- Application Process and Timeline: The process can be faster for businesses with well-organized financial statements and clear asset documentation, offering quicker access to capital compared to traditional bank loans.
- Perception vs. Reality: Many businesses perceive ABF as a last resort or too costly, but understanding its competitive pricing, especially for larger credit lines, and its accessibility can shift this perception.
Conclusion: A New Perspective on ABL Financing
So, perceptions. Realities. You decide, but be open to accessing this new method of financing.
Call 7 Park Avenue Financial, a trusted credible and experienced Canadian business financing advisor for assistance in your reality check!
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / FOR MORE INFORMATION
What exactly is Asset Based Finance?
It's a financing option where loans are given based on the value of your company's assets, such as inventory and receivables and physical assets on the balance sheet such as equipment or commercial real estate which can also be a pledged asset since they are strong assets.
How does Asset Based Financing differ from traditional loans?
Unlike traditional loans, which focus on credit scores and financial history for an unsecured loan facility, Asset Based loans rely on the value of specific assets.
Who can benefit from Asset Based Finance?
Businesses with solid assets but perhaps not perfect financials find this type of financing from an asset based lender especially beneficial. Companies that cannot qualify for bank financing can qualify for an asset-based line of credit.
What types of assets are typically used in Asset Based Financing?
Common assets include accounts receivable, inventory, equipment, and sometimes real estate.
Are there any specific industries that find Asset Based Finance more favourable?
Wholesalers, retailers, manufacturers, and distributors often utilize this financing from asset based lenders to their advantage due to their asset-heavy operations.
What are the typical fees associated with Asset Based Financing?
Fees can include interest rates higher than traditional bank loans, appraisal fees, and commitment fees, especially for larger credit lines.
How quickly can a company access funds through Asset Based Financing?
The timeline can vary, but with organized financials and asset documentation, access to capital can be faster than traditional bank loans.
Can startups or new businesses use Asset Based Financing?
Yes, if they have valuable assets to secure the loan, startups and new businesses can qualify for ABL solutions from asset based financing companies. Many firms utilize asset based finance factoring which is a subset of asset based lending in Canada.
Can public companies access Asset Based Financing?
Absolutely, both private and public companies in Canada, including those on the TSX or Venture exchange, can access ABL facilities or an asset based loan.
How does Asset Based Financing impact a company's balance sheet?
It can improve liquidity by turning assets into working capital without significantly increasing debt in a traditional sense.
What happens if the value of the secured assets decreases?
Lenders may require additional collateral or adjust the borrowing base if the value of the secured assets significantly decreases.
