YOUR COMPANY IS LOOKING FOR AN ABL BUSINESS REVOLVING CREDIT FACILITY!
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Financing & Cash flow are the biggest issues facing business today
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ABL financing, basically a business revolving credit facility, has the ability to provide a significant amount of ' peace of mind ' when it comes to the worries and challenges that confront business owners and financial managers.
And that doesn't matter whether you are a start-up or a major Canadian corporation. And everything in between. Because that's who is using asset based lines of credit these days.
But is ABL finance right for your firm? Let’s discuss, and recap. Companies who consider an ABL facility find themselves constantly challenged by understanding what is happening to their cash flow.
These days you may, or may not have a current secured lender in place to handle those financing challenges we're talking about. One aspect of deciding whether to go the Asset based revolver route is often some sort of seasonality - we can call them ' bulges ' in your business.
That seasonality, those ' bulges ' drastically affects cash flow and income, which can fluctuate wildly in any company. The asset based line of credit allows you to generate cash flow during those bulge periods, while at the same time allowing you to keep your operating and debt service obligations up to date.
That's of course critical when you are wrestling with fluctuating working capital situations.
The timing of cash flows in business is paramount. The three things that almost always affect your timing in working capital and cash flow in business are receivables, inventory, and, on the other side of the balance sheet, payables.
Asset based lending via an ABL financing business line of credit often can provide the solutions when the door is closed at Canadian chartered banks for firms that don't meet bank criteria. It's a case of a business having a high potential for viability and growth, but has less than stellar income statements and ratios typically required by our banks in Canada.
So how does a company get the door open to financing when they have been locked out by more traditional solutions? The answer is an ABL revolving credit facility, focusing on assets that when properly monetized, can enhance the cash flow situation.
ABL, therefore, becomes a ' smoothing out' solution because you draw down on cash flow, daily, as needed, based on your assets and sales/receivables. It also can be used; by the way to assist in the financing of new fixed assets, or even buy a competitor. It's those assets that help the strategy work.
ABL financing works because it applies higher borrowing formulas to your business assets. Companies that are in service or non-intensive capital industries will always be a bit challenged in an ABL revolving credit facility simply because the main asset monetized are only receivables.
Other challenges in getting a proper asset line of credit in place might be the type of inventory you carry, or any specialization attributed to your assets or industry.
So, right for everyone? Perhaps not. But if you have A/R, inventory, receivables, purchase orders and are looking for a new way to monetize those assets ABL financing might be the business revolving credit facility for your firm. And the peace of mind? As the commercial says 'Priceless'.
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Stan Prokop 7 Park Avenue Financial/Copyright/2020
