YOUR COMPANY IS LOOKING FOR A BUSINESS CREDIT LINE FACILITY!
ASSET BASED LENDING LINE OF CREDIT SOLUTIONS IN 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
Oakville, Ontario
L6J 7J8
Searching for a business credit line in Canada. One question to ask is what is the difference between bank financing of such facilities and the newer ' ABL LOANS' which offer a strong alternative to Canadian chartered bank facilities. So what should the business owner/financial manager pack when embarking on this trip? Let's dig in.
IS THERE A BANK ALTERNATIVE TO BUSINESS CREDIT LINES?
A tremendous amount of business owners/ financial managers still equates revolving lines of business credit with our Chartered banks when they consider a funding requirement and a specific financing solution. While it is true they offer the lowest interest/ financing rates, and unlimited capital to borrow from the reality is that every firm does not qualify for a bank credit line.
ASSET BASED LOANS ARE THE BUSINESS REVOLVING BUSINESS LINE ALTERNATIVE
ABL (asset-based) Loans serve the same purpose as bank lines. This form of Canadian business financing arose out of the tremendous popularity of ABL solutions in the United States, where a large majority of firms use non-bank financing services. They provide your firm with cash flow/working capital that bridges the timing of turning your revenues into cash. Carrying inventory and receivables are the drivers behind that need for business credit. Like bank lines, the asset-based line of credit is a revolving credit facility. ABL comes with higher rates but at 7 Park Avenue Financial asset-based lending is viewed more as access to credit versus the cost of credit.
HOW DOES THE ABL CREDIT LINE DIFFER FROM BANK CREDIT FACILITIES
ABL business credit facilities differ from the banks in that they often have no upward limit. While limits might be initially set, as your business grows and investments in A/R and inventory increase so does your borrowing power. Bank facilities tend to be traditionally capped at a certain borrowing limit, are credit risk-focused, and are reviewed annually based on financial statements, profitability, cash flow coverage, and any other collateral the bank might hold.
While a bank lender would rarely finance a deficit net worth company the ABL lender will based on sales, assets, and cash flows.
One other key difference is that if the business has company-owned real estate the equity in the real estate can be a part of the credit line, or, alternatively, set up as a separate bridge loan.
HOW DOES THE ASSET BASED LINE OF CREDIT WORK?
Business owners can be forgiven for asking ' How can the non-bank asset-based lender offer this type of facility that is so different from our Canadian chartered banks?'
The reality is three-fold:
They are non-regulated and can do what they want
They focus solely on assets - not ratios and covenants - it's simply more borrowing power in a unique facility structured around your firm's needs in business borrowing for day to day funding and growth
HOW ARE ABL FACILITIES MANAGED?
They perform a higher level of due diligence and reporting in both setting up the facility and then monitoring it - you can expect to supply monthly reporting in the form of aged accounts receivable, payables, inventory and equipment lists - Bottom line - It's all about the cash flowing business assets that are on your balance sheet.
WHY CHOOSE AN ASSET BASED CREDIT LINE?
What are the issues that allow a firm to consider asset-based versus bank credit lines? One might be fast growth. When your financials don’t support the equity, debt and ratios required by the banks, or if there is seasonality in or ' bulge ' requirements for growth you're a strong candidate. ABL offers more borrowing capacity at a time when you need it most.
WHAT COMPANIES CAN UTILIZE NON BANK ASSET BASED CREDIT LINES
We are assuming you have investigated lower-cost options such as the bank and simply don’t qualify regarding their requirements. If you can produce clean financials, can report on assets such as accounts receivables and inventories regularly you're a candidate for ABL loans!
WHAT IS THE MINIMUM AND MAXIMUM LIMITED ON ASSET BASED LOANS
Typical ABL business credit line facilities start at 250k as a minimum - As for the upward limit, there is really no upward amount that can't be financed if you're with the right lender.
DO BANKS OFFER ASSET LOANS / CREDIT FACILITIES
Usually, abl lenders in Canada are not banks ... but ...It's a bit of a secret that Canadian chartered banks, for the most part, have small internal niche divisions of ABL credit that compete, to a certain degree, for this type of business. It's unclear to us whether their requirements differ that much from typical bank offerings - we'll let our clients decide that one.
INCREASED BORROWING POWER
By the way, borrowing power is greater with ABL facilities. A/R is margined at 90%, and healthy borrowing is in place for your inventory and equipment, all of which are bundled in the same facility. In asset finance, if you reach any ' credit limit ' that limit can quickly be increased based on your increased sales and assets. It's an easy way to plan and drive business growth.
CONCLUSION
Looking for business financing expertise? While some may consider ABL as a ' hidden market’ it’s becoming more and more popular every day. When you are assessing your business needs seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in determining if your firm has what it takes to embark on that ABL loan trip!
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2021/Rights Reserved
