ABL Facility - Unlock Your Business's Financial Future

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Asset-Based Lending facilities revolutionize how businesses access funding by leveraging their existing assets.

Struggling to finance your business? Discover how your assets can unlock new growth opportunities!

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ABL FACILITY solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities

Understanding ABL: Financing That Grows with Your Assets

INTRODUCTION

A business line of credit tends to focus mainly on one issue - delivering on cash flow! What is the best bank for a business line of credit - Is there an alternative? ( Spoiler alert - yes, there is!) Let's dig in!

Asset-Based Lending (ABL) facilities are designed to improve cash flows and liquidity while allowing business owners to focus on business growth by leveraging a company's assets as collateral.

ABL facilities provide businesses, especially those facing challenges in securing traditional loans, with an immediate inflow of working capital based on the value of their tangible assets and the revenues of the business.

This unique financial solution offers a lifeline for companies in industries where cash flow fluctuation is common, allowing the business to stabilize financials and grow and profit with a higher level of flexibility while growing the business.

BUSINESS LINE OF CREDIT LENDERS IN CANADA

Typically Canadian business owners/financial managers have only 2 choices in this area of small business -

1. Bank Revolving Credit

2. Commercial Finance firms who deliver on credit lines via asset finance strategies for available credit

It's often the case that firms using Canadian chartered banks cannot fully access the total working capital solution they require through their banks.

Ironically when we meet with many clients, they are not familiar with the term, let alone its benefits! So no surprise that one of the fastest-growing trends in Canada revolves around a concept known as an 'asset-based line of credit. '

So is this type of business financing better than a Canadian chartered bank line of credit with a defined credit limit? We'll let you be the judge of that.

WHAT ARE BUSINESS LINE OF CREDIT ADVANTAGES WHEN CONSIDER ASSET FINANCE FACILITIES?

Here are, therefore, the reasons why working capital cash flow funding via asset finance might be the Holy Grail for your firm’s growth and success,

1. The facility will bring you higher levels of liquidity, cash flow and working capital based on your asset base

2. You qualify much more easily for a facility that is in fact even higher in line of credit requirements

IS ASSET-BASED LENDING THE BEST BUSINESS LINE OF CREDIT?

In recent years the term asset-based lending had somewhat of a negative effect or perception when business owners discussed it. But, guess what - time changes, and nothing changes faster than trends in business.

The 2008 and 2009 global economic meltdown forced thousands of businesses, small, medium and even large, to reassess their financing. In some cases, that was simply because their financier disappeared! And boy did the COVID 19 epidemic change the business world once again!

WHY BUSINESS LINE OF CREDIT COLLATERAL DELIVERS ON LIQUIDITY

So let's get back to our premise #1: utilizing an asset-based credit line brings you greater liquidity. Why is this so?

It is simply because the asset-based facility focuses solely on the assets. As you may have so painfully discovered, traditional financing focuses on balance sheet ratio, profitability, external collateral, and personal guarantees.

The reality is that if your firm is selling shoes to WALMART (as an example), then historically, your bank or lender had no sense of what those shoes were worth or what to do with them in a worst-case scenario.

BUSINESS LINE OF CREDIT COLLATERAL

Enter asset-based lending! Working with a credible, trusted and experienced asset-based lending advisor will allow you to truly leverage assets to borrow for more liquidity, working capital and profit growth.

WHAT ASSETS ARE BEHIND THE ASSET FINANCE BUSINESS LINE OF CREDIT

So what are those assets you can leverage - they are as follows:

Receivables

Inventory

Equipment (that is unencumbered)

Real estate (If applicable)

Look at your current working capital and credit facilities - you may have these through a bank, or even more challenging, you might be self-financing. If you could leverage tomorrow 90% of your receivables, 50-70% of your eligible inventory, and borrow every month against fixed assets, would that work for your firm? We have a feeling that, in many cases, we just doubled and tripled your borrowing power which is a key consideration if you are only comparing the interest rate.

Let's look at our premise # 2- you qualify for more capital with less stringent qualification requirements. This point somewhat dovetails on our point #1 - that is to say that the total focus of an asset-based line of credit revolves mostly around one work - the ' Asset ‘!

The values of your assets determine your total operating facility - it is not predetermined by balance sheet ratios, covenants, etc.

Traditional institutions such as banks emphasize personal credit score & credit history of owners, personal guarantee, outside collateral, etc. Naturally, a business loan through banks comes with the best interest rates.

In some cases, a credit union for a business line of credit solutions might be an alternative, but in general, credit union requirements mirror that of Canadian banks. When it comes to a business line of credit average interest rates, we can always say banks and credit unions deliver the best financing rates.

Naturally, any type of business credit line allows your company to pay interest on only the amount of funds you have drawn down, unlike a ' lump sum ' loan - which is why revolving credit facilities are the perfect short-term financing solution.

Most business owners and financial managers use the facility for the primary purpose of providing day-to-day working capital and liquidity to their firm. Asset-based lending has less stringent overall requirements, but we should mention that it is generally more expensive than bank financing.

OTHER USES OF ' ABL LINES'

You can use asset-based credit lines to complement many parts of your business, including:

Acquisition of a Competitor

Growth

Turnarounds

A business line of credit for startups is a challenge as firms are still building revenues and acquiring and growing their asset base. 7 Park Avenue Financial recommends factoring, a subset of the asset-based lending solution and provides immediate cash flow as the company generates sales. For more information on sales accounts receivable financing, talk to our team today.

Types of Assets for Collateral: Understanding what can be leveraged—inventory, receivables, equipment—forms the backbone of ABL.

Loan Structure and Terms: The structure of ABL agreements varies, and grasping these details will reveal how credit limits are dynamically tied to the collateral's value.

Eligibility Criteria: Knowing who qualifies helps businesses assess if ABL is right for them.

Impact on Cash Flow: ABL facilities can improve cash flow by providing working capital against assets, crucial for daily operations.

Risks and Benefits: Analyzing the risks, such as dependency on collateral value, and benefits like quicker loan approval, is vital for informed decision-making.

CONCLUSION - ABL FACILITY

Call 7 Park Avenue Financial; a trusted, credible and experienced Canadian business financing advisor who can assist you in your business needs around a business credit line and cash flow requirements around your financial goals.

What is a business line of credit?

A business line of credit is an unsecured loan that provides flexibility with borrowing limits. Businesses can withdraw as much money from their account balance as needed up to the limit.

A business line of credit can help you manage cash flow, buy inventory or pay for an unexpected expense. Asset-based loans such as the ABL credit facility are different than bank unsecured lines. Financial covenants are either non-existent or less restrictive than bank credit lines and commercial real estate equity can be included in the facility - as well as potentially intellectual property.

One of the most challenging aspects of starting a business is finding a way to fund operations. To help overcome this hurdle, there are multiple types and sources for borrowing capital available today, including banks and asset-based lenders.

Lender requirements vary with the borrower's circumstances. When applying for funds from any lending institution or commercial finance company, a business should have documentation such as personal tax returns (in addition to business), information on business bank accounts and financial statements which provide details about revenue generation and cash flow over periods typically ranging from 2-3 years before eligibility can be determined.

What is the difference between business credit cards and business credit lines?

A Business credit card and business lines of credit are both methods for borrowing money, but they each have their own advantages. A traditional line of credit may be secured by collateral and sales revenues, whereas a business card might charge a business more in fees or offer you less access to your funds; this is why it's important to weigh the pros and cons before deciding which type suits your needs best-concerning repayment.

Business credit cards are great for small ongoing expenses and newer businesses. They differ from a traditional business line of credit in several ways, including higher interest rates, fees when cash is needed immediately (late-payment charges), annual fees, etc.

Unlike traditional loans, ABL facilities allow businesses to borrow money based on the liquidation value of their assets rather than their creditworthiness. ABL credit and term loans are two different types of financing - one is a revolving facility and the other is a term loan installment structure. Term loans focus on a borrower's future cash flow in a cash flow facility.

Common collateral types include inventory, accounts receivable, equipment, and sometimes even real estate.

By providing immediate funds against assets, an ABL facility helps businesses manage their operational expenses more efficiently.

Terms vary but generally include a borrowing base certificate, periodic asset appraisals, and a flexible repayment structure based on asset liquidity.

Who should consider using an ABL facility? Businesses needing quick access to capital, those with strong asset bases but poor credit, or companies in industries with high cash flow variability might benefit most.

Interest rates in ABL are typically tied to the borrower's risk profile and the type of collateral offered.

While challenging, startups with substantial tangible assets may be eligible for ABL if they meet specific lender criteria.

If collateral value declines, borrowers may need to either repay part of the loan or provide additional collateral or the advance rate may be reduced.

Industries such as manufacturing, wholesale, retail, and distribution are ideal for ABL due to their high levels of inventory and receivables.

The process typically involves asset valuation, financial assessment, and legal documentation to establish a credit line based on the asset's worth.

Funds can typically be accessed shortly after the assets have been appraised and a credit line established, often within a few weeks.

Businesses using asset based finance must regularly report their asset status and adhere to the terms of the credit agreement, including maintaining certain asset values. Typical reporting requirements are done monthly.

Yes, since an asset based loan is backed by physical assets, which create borrowing base assets. ABL is seen as a lower-risk financing option compared to unsecured loans when businesses assess financial planning solutions.

' 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 Facility: Unleashing Your Business Potential | 7 Park Avenue Financial

CONSIDER AN ASSET BASED LINE OF CREDIT!

Understanding ABL: Financing That Grows with Your Assets

INTRODUCTION

BUSINESS LINE OF CREDIT LENDERS IN CANADA

WHAT ARE BUSINESS LINE OF CREDIT ADVANTAGES WHEN CONSIDER ASSET FINANCE FACILITIES?

WHAT ASSETS ARE BEHIND THE ASSET FINANCE BUSINESS LINE OF CREDIT