YOUR COMPANY IS LOOKING FOR ABL CREDIT - ASSET BASED LENDING WORKS !
ASSET BASED LENDING / ABL LENDING CANADA
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
The ABL business credit line could well be called the ' new vintage' in business financing. In simplest terms, it's borrowing, via one facility, against all your business assets. What are those assets? Typically receivables, contracts, inventories, and equipment. Why should you consider this type of non-bank borrowing? It is the ultimate asset-based loan. Let's dig in.
NOT ALL BUSINESSES ARE ELIGIBLE TO BORROW UNDER BANK REQUIREMENTS
Bank financing in Canada, low cost and flexible, is not available to all businesses in Canada's SME Commercial sector.
GROWTH CREATES CHALLENGES IN WORKING CAPITAL NEEDS
It is an irony in business that growth opportunities and the ability to generate more sales and profits become ' too much of a good thing' related to its ability to handle that growth. While that might refer to people, systems, processes, and new assets required we're focusing on cash flow and working capital availability.
THE RISK OF ' OVERTRADING
Europeans have a great name for this - they call it overtrading. Without a decent facility in place payable grow, CRA obligations mount, and the company struggles to meet client needs.
IS ASSET BASED FINANCE THE SOLUTION YOU HAVE BEEN LOOKING FOR
Asset based loans (" ABL" asset-based lending) provides one solid line of credit solution to that challenge. In effect, you are opening the tap by cash flowing your business assets. Part of the cash flow shortage problem is that a ' domino theory' exists in commercial ' business to business' transactions. Each firm stretches out payables- the irony included here is that even the largest corporations and government bodies are sometimes the slowest payers!
ABL BACKGROUND
ABL originated in the united states, where it is very popular, even exceeding commercial bank borrowing!
THE RISE IN POPULARITY OF ASSET FINANCE SOLUTIONS
So why is the ABL business credit line getting more popular every day? Simply because it provides the alternative to traditional Canadian chartered bank financing that might not be available. The right facility, properly structured, with the right finance firm, can provide unlimited capital, allowing the owner/manager to capitalize on growth opportunities.
HOW DOES AND ASSET BASED LOAN / LINE OF CREDIT WORK?
Part of the appeal of the ABL business credit line is the way it is structured. As your assets and sales revenues grow you have the ability to draw down daily. We should probably note that the borrowing calculations you receive on your maximum borrowing power in fact are calculated monthly by a standard document known as a ' borrowing base certificate'. It totals your accounts receivable, inventory and equipment and allows you to borrow against that balance via some very healthy margining ratios. Typically that's 90% of A/R, 30-70% of inventory, as well as the liquidation value of equipment.
REAL ESTATE AS PART OF YOUR LINE OF CREDIT?
If there is real estate on your balance sheet as part of the company's assets, or in a separate holding company that could also be included as part of your credit facility - based on the owner equity in that part of the transaction. An appraisal might be required on the real estate portion as a part of the due diligence to set up the transaction.
Typically though it's fixed assets and receivables inventory that is the main aspect of the borrowing base.
A short technical point - Inventory is assessed when you start up your facility and an ongoing borrowing percentage is applied to future inventory calculations. As far as equipment goes assets are appraised at the start of the facility and become a key part of your borrowing base.
WHAT DOES ABL COST?
Costs vary in the asset based loan. Larger creditworthy concerns can achieve facilities that are even lower priced than banks! But the majority of the SME COMMERCIAL sector that uses ABL credit pays higher rates than banks, the trade-off being access to unlimited credit that goes lockstep with sales growth.
CONCLUSION
Let asset-based financing become the credit line you have been looking for. There's nothing like the taste of a good new ' vintage ', so it might be time to consider speaking to a trusted, credible and experienced Canadian business financing advisor who can introduce you to a new idea in business credit and commercial finance options.
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Stan Prokop
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