YOUR COMPANY IS LOOKING FOR AN ABL REVOLVING CREDIT FACILITY
THE ASSET BASED LOAN SOLUTION FOR REVOLVING LINES OF CREDIT
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Financing & Cash flow are the biggest issues facing businesses today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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The ABL Revolver revolutionizes business financing by offering unparalleled flexibility and accessibility to working capital
Unlock your business's potential with ABL Revolver - the key to overcoming financing hurdles
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ABL REVOLVER solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
THE ABL REVOLVER - CANADA
Talk about two different problems... a cash flow challenge (or ongoing cash flow crisis!) and badly needed growth financing.
INTRODUCTION - ASSET BASED LOANS IN CANADA
Asset-Based Lending (ABL) Revolvers leverage a company's assets as collateral, and provide a lifeline to organizations seeking liquidity without the stringent requirements of traditional bank loans.
ABL Credit lines support operations, growth, and restructuring, and allow your company to unlock it's full potential.
Let's take a look at how ABL Lending / ABL loans via asset-based lending and financing can be the perfect solution for your revolver facility loan needs.
In business, there’s nothing more urgent than a 'call to action around a working capital or cash flow crisis. At this point, it's all about 'righting the ship' and allowing Canadian business owners and financial managers to get their business finances under control. It's more often than not a case of simple survival.
WHY CHOOSE ASSET BASED LENDING
Naturally putting in a proper ongoing financial solution, such as an ABL financing revolved allows you to get your eyes back on running the company normally on a daily basis - we meet with clients who regularly tell us that a huge amount of time is spent on managing cash crises and juggling things such as vendor payments. The bottom line, it's time to stop putting out the fires and focus on a solution such as ABL finance ... that works!
FINANCING FLEXIBILITY
In many cases, companies are searching for growth financing solutions and might even be considering a business acquisition.
It is not unusual for firms in certain industries to always be faced with seasonality in their business, with a requirement for occasional bulge financing to ease cash flows.
The beauty of the ABL line of credit solution is that it can address some challenges and opportunities at the same time - ie recapitalization, turnarounds, or the challenge of too much leverage on the balance sheet and not enough funding to run and grow the business - We can safely say ABL is ' flexible financing' at its best when compared to traditional operating facilities.
A true asset based line of credit can allow you to get back the confidence that your suppliers, lessors, and other lenders had in your business, and that’s important. Lenders, investors and suppliers truly can control the destiny of your company if the perception of a permanent cash flow shortage remains.
WHAT IS AN ABL REVOLVER?
A revolver facility in asset finance and business credit terms is simply a credit facility that revolves as part of a credit agreement between the company and its senior lender. These lenders are typically asset-based lending commercial financing companies or traditional banks.
DO BANKS OFFER ASSET BASED LOANS? ASSET BASED LENDING BANKS?
So, enough about the fear! Let's focus on a solution that works. Simply speaking, that’s asset-based financing via a revolver facility that is generally non-bank in nature. (Some Canadian banks now offer this facility but the credit requirements and deal size criteria are, in our opinion, exceptionally high).
Commercial banks and chartered bank solutions focus on cash flow lending via unsecured loans or term loans on specific assets such as equipment.
Bank credit and term loans have several financial covenants attached to borrowing as they deliver low-interest rates while focusing on cash flow and profit versus a company's assets - ABL is considered 'covenant light - with little or no emphasis on personal guarantees or outside collateral.
HOW DOES AN ABL REVOLVER WORK?
The concept of asset based lending, aka ' ABL ' is simply securing your assets, and leveraging them to the maximum that is possible, with the result being greater liquidity for your company.
And by the way, don’t think we have just leveraged up a ton of debt on your balance sheet - 100% wrong, we have simply monetized or 'cash flowed' existing assets... allowing you to borrow against them.
Comprehensive financial solutions are available for a variety of Those assets are typically very clear categories of physical assets and balance sheet assets such as receivables, inventory, equipment, and occasionally real estate and tax credits due to your firm.
(Yes tax credits such as the SR&ED credit can be included in your financing package). Asset-based lending for real estate is typically structured as a separate loan, but can be bundled into a facility also!
So the question then becomes, don’t banks do this already...? And you have tried that possible scenario. The quick takeaway here is two things. First of all ABL loans and financing revolver facilities provide greater leverage on current assets.
Accounts receivable are typically margined at 90%, and inventory, often difficult to finance for cash flow, can be margined anywhere from 30-70% as example. If you were getting 75% from your bank on A/R and nothing on inventory haven’t we just increased your working capital by anywhere from 50-100%?! Wow.
A very simple way to look at this, and we use this example with clients all the time is to simply think of the asset-based lender solely looking at the collateral, while the banks will focus on collateral, but mainly historical cash flow, ratios and covenants, and outside collateral via personal guarantees, etc.
(As a general rule very little emphasis is placed on personal guarantees when an ABL loan facility is put in place. The asset-backed loan interest rate is usually higher than traditional bank financing, but not always!
Oh, and by the way, you absolutely don’t have to be profitable to qualify for asset-based lending facilities, which in Canada start at a low of 250k and go to the tens of millions of dollars.
KEY TAKEAWAYS
Businesses can secure loans based on their sales and assets. Understanding the differences between ABL and Traditional Lending reveals the unique benefits and flexibility ABL offers.
ABL Revolvers allow a companyt to borrow against assets, providing continuous liquidity.
CONCLUSION
Asset based loans are available in multiple forms to Canadian businesses looking for business capital to run and grow the business.
Your business assets such as accounts receivable, inventories, fixed assets and real estate and other assets can establish a borrowing base for substantial financing based on solid margins on the face value of a broad range of business assets.
Let the 7 Park Avenue Financial team help you understand asset-based lending advantages and potential disadvantages.
So, cash flow crisis for small and mid-sized companies, or just regular business needs? Growth challenges/growth opportunities? Looking for a solution such as ABL credit?
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor to ensure an ABL working capital facility is right for your firm.
FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION / PEOPLE ALSO ASK
What does ABL loan mean?
The asset-based loan, aka 'ABL' is a credit facility under a term loan or operating line of credit that is supported by a borrowing base of the assets of the company.
Different types of ABL facilities exist, some of the individual subsets of asset finance, such as accounts receivable financing/factoring, inventory finance, and sale-leaseback financing on equipment of commercial real estate owned by the business. The asset finance solution typically delivers ' more financing' when compared to commercial banking under traditional bank finance solutions.
Asset-backed financing solutions are often known as having a covenant-light structure with a less restrictive covenant and ratio requirement that might need to be maintained. Companies with higher balance sheet leverage are strong candidates for asset finance funding.
What is an ABL facility?
An ABL facility is a senior credit facility that provides business funding secured by first position security on the assets of a business - The asset-based lender performs an appropriate level of due diligence around asset values such as accounts receivables, inventory, fixed assets, etc.
What is a revolving credit limit?
Revolving credit limits allow companies to draw down on a set credit facility on an ongoing basis based on balance sheet asset values and constant replenishment of the facility based on collections and cash inflows of the business.
How does ABL Revolver differ from traditional loans?
Asset-based lending, or ABL Revolver, offers a more flexible and accessible form of financing by using a company's assets as collateral, unlike traditional loans that focus on creditworthiness and financial history.
What assets can be used as collateral for an ABL Revolver?
Typically, receivables, inventory, equipment, and sometimes real estate can serve as collateral for revolving debt, providing businesses with a broad range of options to secure funding.
How can an ABL Revolver improve my business's cash flow?
By providing a revolving line of credit based on asset values, it ensures liquidity is readily available, thus improving cash flow management and operational flexibility.
What are the typical terms and conditions of an ABL Revolver?
Terms vary but generally include interest rates competitive with other forms of lending, with the loan amount based on a percentage of the collateral's appraised value.
Who can benefit the most from using an ABL Revolver?
Businesses with significant physical assets, facing growth challenges or undergoing restructuring stand to benefit greatly from the flexibility and accessibility of ABL Lenders.
How quickly can a business access funds with an ABL Revolver?
Funds from an ABL Revolver can often be accessed shortly after the valuation of assets, making it a swift solution for immediate financial needs.
Is there a minimum business size or revenue requirement for ABL Revolvers?
While requirements can vary, generally there is flexibility, with ABL Revolvers accommodating a wide range of business sizes and stages, especially those with substantial assets regardless of their revenue.
Can ABL Revolvers be used for international transactions?
Yes, ABL Revolvers can support international transactions, providing businesses with the capability to finance operations and expansions globally, subject to the lender's policies and international trade regulations.
How does the repayment structure work with an ABL Revolver?
The repayment structure of an ABL Revolver is typically flexible, allowing businesses to draw and repay funds as needed within the agreed-upon limits and terms, making it ideal for managing fluctuating cash flow needs.
What happens if the value of the collateral decreases?
If the collateral's value decreases, the lender / credit issuers may require additional collateral or a reduction in the loan balance to maintain the loan-to-value ratio, ensuring the loan remains adequately secured.
How does an ABL Revolver enhance financial flexibility for a business?
An ABL Credit Facility enhances financial flexibility by providing a revolving credit facility that businesses can draw upon as needed, repaying and re-borrowing within the credit limit based on current asset values. This adaptability helps manage cash flow effectively, making it a powerful tool for businesses facing variable capital requirements.
What role does asset valuation play in an ABL Revolver agreement?
Asset valuation is critical in an ABL Revolver agreement, as it determines the borrowing base in the revolving credit agreement, i.e., the maximum amount a business can borrow. Regular appraisals ensure the loan amount reflects current asset values, allowing for adjustments in the borrowing base in line with changes in asset values.
How can businesses prepare for an ABL Revolver application?
To prepare for an ABL Revolver revolving credit line application, businesses should ensure their financial records are accurate and up-to-date, conduct a thorough inventory of eligible collateral, and understand their cash flow needs. Additionally, developing a clear plan for how the funds will be used and demonstrating the ability to manage the revolving credit effectively will strengthen the application.
