YOU ARE LOOKING FOR A DIFFERENT TYPE OF BUSINESS CREDIT FACILITY?
ASSET BASED LENDING ('ABL' ) JUST MIGHT BE IT!
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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Asset-Based Lending (ABL) business loans provide a powerful financing solution by leveraging your company's assets to secure vital capital.
Unlock capital tied up in your assets to fuel your business growth with ABL business loans.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ABL BUSINESS LOANS & solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
Canadian Business Financing with the intelligent use of experience
ABL BUSINESS LINE OF CREDIT
Your business credit line probably won't be delivered by the Amazon drone we read about the other day. If that's the case, one option for the Canadian business owner /financial manager to consider is the ABL line of credit solution. Let's dig in.
And yes, that ' A ‘in ABL facility does, in fact, stand for ' Assets '. You can leverage ' ALL ' of your business's assets to achieve maximum financing capability in lines of credit fully.
SECURE YOUR FUTURE WITH ABL BUSINESS LOANS
Canadian business owners know that the business financing landscape can be both complex and frustrating. One effective solution is the Asset-Based Lending (ABL) business loan, which allows businesses to leverage their assets, such as inventory, accounts receivable, and equipment, to secure much-needed capital. Even company-owned commercial real estate can be included as part of the facility!
ABL Business Loan: Asset-Based Financing Versus The Bank
The standard comparison here is Asset-Based Lending vs. your Chartered Bank revolving business credit facility. The simple way we explain this to our clients is that our chartered banks, in their wisdom, have focused on past historical performance and quality of cash flow and debt-to-equity measurement, often referred to as cash flow financing. Asset-based revolving facilities are very similar in a day-to-day manner to bank facilities.
ASSET BASED LOANS ARE ABOUT ONE THING
That’s all fine, but your asset-based lender is laser-focused on one thing - you guessed it - ASSETS! Physical assets such as real estate, equipment, and inventory are often used as collateral to secure these loans, creating the best asset based loan possible. This method of business borrowing is even larger in the United States, where it originated.
WE ARE NOT BANK BASHERS ... BUT
We are always conscious of being ' bank bashers ' - we're told it’s the Canadian way in business, we suppose.
5 KEY REQUIREMENTS OF BANK FINANCING
No one supports banks more than us, so if your company can demonstrate:
Profits
Quality Tangible Collateral
Acceptable ratios and covenants on the balance sheet
Outside collateral/owner guarantees
Reputable cash flow/business projections
You are very close to achieving full bank approval for all the capital you need.
Unlike asset-based lending, cash flow lending allows companies to borrow money based on projected future cash flows and the historical business's cash flow - and does not require physical collateral like property or assets. It is better suited for companies with high margins or insufficient hard assets to offer as collateral.
When all those criteria cannot be met the best way to achieve business credit line delivery is potentially the ABL asset based line of credit.
While negative issues will certainly be discussed in your negotiations on your ABL credit facility, reasonable heads will often prevail because of the ABL lender's past experience in your industry.
BORROWING LIMITS AND LOAN-TO-VALUE RATIO
If there is one undeniable benefit to asset-based credit lines, you can maximize borrowing capacity more than a bank facility. Let’s use the example of a company in the SME sector that has a $1,000,000.00 level of accounts receivable. Typically, a bank will lend $750,000.00 against that ongoing balance, but the ABL lender is often as comfortable lending $ 900,000.00 in our example. The bottom line is working capital enhancement!
Fixed assets also play a vital role in the credit line if required, although the receivables inventory component is the most widely used.
MARGINING YOUR ASSETS TO THE MAX FOR WORKING CAPITAL!
While many banks struggle with inventory loans as a component of the credit line, the right ABL lender will analyze your inventory's various components (raw materials, work in progress, finished goods) and determine a borrowing level typically 25-75% of the total value.
THE COST OF BORROWING
Rarely is any Canadian business financing a ' slam dunk '. In the case of the ABL business credit line, the business owner/manager should expect a higher borrowing cost and some real due diligence on eligible collateral on your firm from abl lenders, including facility visits, inspections, an appraisal, etc.
REPORTING REQUIREMENTS
While many chartered bank facilities may require you to report quarterly or annually on your performance, the Canadian business owner/manager will be expected to submit a minimum monthly package of financial statements, assets, payables, a/r agings, etc. Good businesses should already be able to do that!
KEY TAKEAWAYS
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Asset-Based Lending: The core of ABL, where business assets secure loans.
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Collateral: The assets used to secure the loan, such as inventory, accounts receivable, and equipment.
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Loan-to-Value Ratio: The percentage of the asset's value that a lender is willing to finance.
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Borrowing Base: The total value of assets that a lender uses to determine the loan amount on the revolving line of credit
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Flexibility: ABL loans offer flexible terms based on the value of the assets, providing more tailored financing options.
CONCLUSION
So, is the ABL business credit facility right for your firm? Evaluate the option and call 7 PARK AVENUE FINANCIAL, a trusted, credible, and experienced Canadian business financing advisor with a track record of success in credit lines tailored for Canadian companies with good future prospects.
FAQ
What is an ABL business loan?
An ABL asset based loan is a financing option where a company uses its assets, such as inventory, accounts receivable, and equipment, as collateral to secure a loan.
How does an ABL business loan benefit my business?
An ABL financing business loan provides quick access to capital and flexible terms. Leveraging existing assets is typically structured and tailored for financing solutions that can improve cash flow.
What types of assets can be used as collateral in an ABL business loan?
Common collateral assets include inventory, accounts receivables, machinery, and equipment.
What are the requirements to qualify for an ABL business loan?
A business typically needs a strong asset base, good financial statements, and a solid business plan to qualify.
How is the borrowing amount determined in an ABL business loan?
The borrowing amount is determined by the value of the assets used as collateral, often assessed through a loan-to-value ratio.
What is the difference between ABL loans and traditional loans?
Assets secure ABL loans, providing flexible financing based on asset value, whereas traditional loans often rely on creditworthiness and financial history.
How can ABL loans improve my company's cash flow?
ABL loans provide immediate cash based on asset value, enhancing liquidity and allowing for better cash flow management.
What industries benefit most from ABL loans?
Industries with significant tangible assets, such as manufacturing, retail, and wholesale, often benefit the most from ABL loans. The covenant-light structure of asset-based financing is appealing to business borrowers.
How do lenders assess the value of assets in an ABL loan?
Lenders typically conduct asset appraisals and audits to determine the current market value of the assets used as collateral.
Are there any risks associated with ABL loans?
Risks include potential loss of assets if the loan defaults and possibly higher interest rates compared to traditional loans.
How do ABL loans compare to other alternative financing options?
ABL loans often provide more substantial funding than options like invoice factoring or merchant cash advances, making them suitable for more significant financing needs.
What is the typical interest rate range for ABL business loans?
Interest rates for ABL business loans can vary widely but are generally higher than traditional bank loans due to the higher risk for lenders.
Can startups qualify for ABL business loans?
Startups may face challenges in qualifying due to limited asset bases, but those with significant equipment or inventory may still be eligible. Many companies choose an a/r financing strategy such as factoring in these cases.
