ABL Lending in Canada: The Business Financing Revolution

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Monetize Your Assets: How ABL Lending is Reshaping Business Financing in Canada

Don't miss out on the ABL lending revolution in Canada because it's reshaping how businesses view financing and growth

The Challenge of Finding the Right Business Financing

We're all familiar with the story - searching the jungles to discover what may not exist - a secret or dream that might deliver wealth or happiness.

What does this possibly have to do with ABL lending and banking via the asset based loan solution in Canada?! Simply that something you think may not have existed in terms of an all-encompassing business loan financing arrangement in fact might exist - you just didn’t know where to find it.

The Canadian Business Financing Landscape

Let's look at the hard facts - in 2008 and 2009 the Canadian business financing market went 'conservative' and boy is that an understatement. Business financing was reduced, and companies such as yours hunkered down and just tried to exist, let alone expand and grow. And now, in 2023 - post Covid-19 the Canadian economy is still struggling and commercial lending is tightening.

Back then Canadian banks emerged as the superstars of the Global financial marketplace - they didn’t go under... they remained profitable, they just did a lot less for many Canadian businesses, and in hindsight, it’s hard not to understand why.

Could it have gotten any worse? Actually yes! Borrowing rates rose, many firms disappeared, and, at the core of our subject here, active lenders exited the Canadian market.

The Rise of ABL asset based lenders (Asset Based Financing ) in Canada

So was it all gloom and doom? You can make the call on that one, but the good news is that one form of business financing, ABL (Asset Based Lending) banking and lending become more valuable and more popular... in a way, it has become our business fountain of youth.

With the increased flexibility of abl financing in Canada came the financing that your business needed to grow. Essentially this type of financing margins physical assets/ balance sheet assets, at a higher value, because Abl lenders understand the true value of the asset - and if they don’t understand it they will take the time to understand the value of those assets. (You might get a bill for that, but it will be worth it, we can assure you!)

Understanding the Essence of ABL Loan Financing

We may have glossed over the true meaning and definition of abl loan financing in Canada. Simply speaking it’s a very clear formula based on the ongoing liquidation values of your receivables, inventory, and equipment, and you borrow every day against those values. It’s a concept that is very easy to understand for most Canadian firms - especially when benchmarked against Canadian commercial banking facilities/cash flow financing for small and medium-sized companies in Canada.

ABL Lending vs. Traditional Banking

So what have we got against banks? Absolutely nothing, in fact, Canadian bank reputation is stellar globally. However, if you can't get prime based borrowing and if you are unable to meet the covenants and ratios required, or if you are too 'small' for such a facility then guess what - the fountain of youth, the secret to business wealth and happiness just might be abl lending and banking facilities.

True asset based facilities aren't 'loans' per se, you are just monetizing assets to create ongoing cash flow.

Key Takeaways

ABL (Asset-Based Lending) is a type of financial solution where businesses secure loans based on the value of their assets, such as inventory, accounts receivable, and equipment.

ABL offers flexibility, often allowing companies to access larger credit lines than traditional lending because it's based on tangible assets. This makes it especially beneficial for businesses that may not qualify for standard loans due to lack of credit history or other financial challenges making cash flow lending difficult.

The amount a business can borrow is typically a percentage of the liquidation value of the pledged assets via a much higher loan to value ratio . For instance, a company might be able to borrow up to 80% of its accounts receivables or 50% of its inventory value. Commercial real estate can also be funded within the facility.

In Canada, ABL can be sourced from traditional banks and specialized finance companies. The structure of the loan, including interest rates and terms, can vary based on the lender and the borrower's financial health.

Monitoring & Reporting:

Due to the nature of ABL, lenders often require regular reporting on the value of the underlying assets. This ensures that the value of assets remains consistent with the loan amount. Depending on the agreement, businesses might provide monthly or quarterly reports detailing asset values, sales, and inventory levels.

Conclusion - ABL Lending as a Business Financing Solution in Canada

FAQ

What is ABL Lending?

ABL, or Asset-Based Lending, is a type of financing where businesses can borrow based on the liquidation values of their assets, such as receivables, inventory, and equipment.

How is ABL Lending different from traditional banking loans in Canada?

Unlike traditional loans that often require stringent covenants and ratios, ABL Lending focuses on the value of a company's assets. It's especially beneficial for firms that might be deemed 'too small' or can't meet typical bank requirements.

Why has ABL Lending gained prominence in Canada's business financing landscape?

During times when traditional banking became conservative, ABL Lending emerged as a flexible and valuable financing solution. It understands the true value of business assets and offers more liquidity based on those assets.

Is ABL Lending suitable for all types of businesses?

While ABL Lending is versatile, it's particularly beneficial for rapidly growing firms, those highly leveraged, companies struggling to meet bank covenants, or businesses experiencing swift growth phases.

How can I get started with ABL Lending in Canada?

If considering ABL as a financing option, it's best to consult with a trusted and experienced Canadian business financing advisor to understand its benefits and application process specific to your business needs.

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

ABL Lending: Canada's Innovative Business Financing Loan Solution | 7 Park Avenue Financial

From Traditional Banks to ABL: The Evolution of Business Financing in Canada