YOUR COMPANY IS LOOKING FOR AN ASSET-BASED LINE OF CREDIT!
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
"Liquidity is the lifeblood of business, and ABL financing ensures it flows where it's needed most."
Struggling to secure the financing your business needs? Discover how an ABL asset-based line of credit can unlock the capital hidden in your assets.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ABL Asset Based Lines Of Credit 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 Line of Credit (ABL)
The Versatility of ABL Asset-Based Line of Credit Financing
Addressing Complex Business Needs
Why do we maintain ABL financing to achieve the impossible?
For us, it seems pretty straightforward. It’s that just one type of Canadian business financing, the asset based line of credit facility, can successfully address and answer ‘YES’ to the following questions:
Businesses might choose asset-based lending to leverage their owned assets as collateral, providing an alternative financing option that offers flexibility in capital access amid fluctuating cash flows.
Key Questions ABL Can Address
-
Is your firm considered high-risk by other, more traditional institutions such as Canadian chartered banks?
-
Do you wish to acquire a competitor or another firm?
-
Do you need interim financing while in a ‘turnaround’ stage?
-
Are you experiencing ‘hyper-growth’ without the necessary financing to handle that growth?
-
Are you considering bankruptcy/receivership or are you in one now?
-
Are you concerned about borrower defaults and need a financing option that leverages collateral to mitigate risks?
Doesn’t it seem incredible that one unique method of financing can address those issues, or is it just us that’s impressed? Hopefully not.
The Growing Popularity of ABL Finance
ABL finance has gradually grown in popularity in Canada; we’re often surprised why it has not grown faster.
Some of the largest companies in Canada, both public and private, now utilize this type of financing.
Asset based loans, which allow businesses to use their physical and financial assets as collateral, come in various types such as inventory financing, accounts receivable financing, and equipment loans.
Even more exciting and somewhat ironic is that Canadian banks have boutique divisions that also offer this finance method.
We have often felt that there aren’t too many differences in some of the credit criteria for banks, which is great for pricing and facility size but less so for approval!
How Asset Based Lending Addresses Business Concerns
The Concept of Asset-Based Financing
So how do asset-based financings address the business concerns we profiled earlier? It’s pretty simple as a concept. Essentially, it’s a line of credit facility that bundles all your assets into one revolving line of credit.
We can’t overemphasize the word ‘assets’ - that’s the strength of the financing. In the case of ABL, it’s not about ratios, covenants, outside collateral, or high emphasis on personal guarantees… it’s just about… you guessed it… ‘Assets’!
Various asset-based financing solutions are available to businesses, offering flexibility and accessibility to optimize cash flow, manage growth opportunities, or navigate challenging financial situations.
Expanding Liquidity Through Accounts Receivable Growth
As your financing levels expand, you can borrow against these rising assets due to sales expansion, etc.
Your newfound liquidity is all about the margining of these assets. For starters, accounts receivable and inventory are typically margined at 90% and 30-70%, respectively.
Accounts receivable can be leveraged for liquidity by using outstanding invoices as collateral.
Accounts receivable financing enables companies to utilize outstanding invoices for working capital, enhancing cash flow and meeting financial obligations. Borrowing against equipment and real estate within a facility further enhances liquidity.
ABL Facility Size and Availability in Canada
In Canada, facilities such as this typically start at $250k and go to tens of millions of dollars. They address all the situations we have mentioned.
The loan-to-value ratio is a critical metric used by lenders to assess the risk associated with asset-based loans. It indicates the loan amount's ratio to the collateral's appraised value.
-
Asset Valuation: Understanding how your company's assets are valued is crucial to determining the borrowing base.
-
Facility Limits: Knowing how the asset-based credit line limits are set helps in managing liquidity, especially when traditional financing relies heavily on a company's cash flow.
-
Covenants: Familiarity with ABL covenants ensures you stay compliant and avoid defaults.
-
Borrowing Base: Grasping the concept of a borrowing base, which is determined by the value of your company's assets, allows for better financial planning.
-
Flexibility: Appreciating the flexibility of ABL over traditional loans provides insight into strategic financial management.
CONCLUSION
The ABL asset-based line of credit is the most flexible financing solution available to Canadian businesses. It is unparalleled in its precision in addressing growth and crisis.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, today to learn how an ABL asset-based line of credit facility just might be what you need!
FAQ
How does ABL financing benefit high-growth companies?
Asset financing allows businesses to leverage their growing assets for increased liquidity, supporting expansion without straining cash flow.
What types of assets can be used in an ABL facility?
ABL facilities typically include receivables, inventory, equipment, and real estate, offering a comprehensive borrowing base.
Can ABL financing help during a financial turnaround?
ABL financing is designed to adapt to fluctuating asset values, making it ideal for businesses in turnaround situations.
How does the valuation of assets impact ABL limits?
Asset valuation directly affects the borrowing base, with higher valuations leading to increased credit availability.
Is ABL financing suitable for businesses in distress?
ABL financing is often a lifeline for distressed businesses, providing liquidity when traditional loans are not an option. Interest rates will typically, but not always,will be higher than bank financing.
What is the difference between ABL and traditional bank loans?
ABL focuses on the value of the assets, while traditional loans emphasize creditworthiness and financial ratios. Cash flow lending, on the other hand, assesses a business's cash flow metrics like EBITDA and debt service coverage, providing an alternative to asset-based lending for companies with strong financial health.
How does ABL financing affect my business’s credit?
ABL financing relies on assets rather than credit scores, often making it available to businesses with weaker credit.
What industries benefit most from ABL financing?
Industries with substantial receivables, inventory, or equipment, such as manufacturing and distribution, benefit most.
How do I determine if Asset based lending ABL financing is right for my business?
Consider your asset base and liquidity needs. If your assets are strong and you need flexible financing, an asset based loan or revolving facility could be ideal.
Can I switch from traditional financing to ABL?
Many businesses transition to ABL when traditional financing no longer meets their needs.
How does ABL financing support business acquisitions?
ABL financing can be structured to include assets from an acquired company, providing the capital needed for the purchase. This method allows businesses to secure funding quickly by leveraging their assets.
What role do covenants play in ABL agreements?
Covenants in ABL agreements are often less restrictive than traditional loans, allowing for greater operational flexibility. Asset based financing typically is known as ' covenant light' financing.
Can ABL be used alongside other financing solutions?
ABL can be part of a broader financing strategy, complementing other types of loans or credit facilities.
