YOUR COMPANY IS LOOKING FOR THE RIGHT BUSINESS CREDIT LINE FACILITY!
BUSINESS LINE OF CREDIT AND REVOLVING LINE OF CREDIT SOLUTIONS
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the most significant 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
Business credit lines provide ' flexibility ' when it comes to financing your business. A revolving facility provides business financing in the short term for day to day funding when new equity or taking on debt aren't the preferred method of growing your company. Let’s dig in.
WHY IS IT DIFFICULT TO GET A BUSINESS LINES OF CREDIT?
If the Canadian business owner / financial manager accepts they need such financing, why does it seem like an ' extreme sport' challenge to achieve success in this area? Don't also forget that this same type of financing has other uses, including the ability to merge or buy another firm using the same assets inside that acquisition and be critical in a business restructuring- not just for working capital and available credit for day to day funding needs.
IS THERE A CHOICE IN BUSINESS LINES OF CREDIT? THE BANK ALTERNATIVE
We're still surprised that a large Canadian small business contingent doesn't know that you have some alternatives in sourcing a business credit line. While the ' go-to ' is always the bank, thousands of firms in Canada have migrated to non-bank asset-based credit lines. While this second alternative is more costly from a ' rate' perspective ( not always, but mostly ), the same flexibility that comes with Canadian chartered bank facilities is, in fact, often even more enhanced with the ' ABL ' ( Asset-Based Line) credit facility.
COMPARING BORROWING ABILITY BETWEEN BANK AND ABL FACILITIES
How does the actual borrowing ability compare between bank credit and a commercial based business loan? While banks traditionally margin receivables at 75%, the asset-based credit line typically starts in the 90% range.
Interest rates are higher in the ABL environment. Still, it becomes a question of access to capital versus cost of capital that becomes the decision to borrow for the business owner. In an ABL facility, you keep your same business account, and funds are deposited as you require them. Of course, credit facilities are not a ' term loan, 'and both bank and ABL lines fluctuate based on business growth and borrowing needs and requirements for access to funds.
BORROWING MARGINS
And while banks are somewhat reluctant to finance inventory when they do, the borrowing margins are somewhat conservative. So how does the asset-based lender handle inventory inside the credit line formula? It focuses on the actual market and liquidation values of the inventory asset in question. So inventory borrowing can be anywhere from 25-75%. So it’s not hard to see that with good accounts receivable and inventory, the ABL line can deliver in many cases 50-100% more cash flow borrowing power.
While bank facilities are typically associated with a credit limit, asset-based credit lines fluctuate based on your sales and assets. In ABL, a monthly ' borrowing base certificate' is used to identify the maximum limit agreed upon that your firm can borrow that month.
WHAT ARE QUALIFICATIONS FOR BUSINESS CREDIT LINES
Any established business with a clean balance sheet, profits, and several years of history, and marginal assets can apply for a bank credit line. Typically ABL facilities tend to start in the 250k range and go anywhere into the millions of dollars. We can comfortably say that there is almost no upper limit on an asset-based line of credit. The proof? Some of the largest and well-known corporations and even retailers in the world have migrated to non-bank facilities if only for the borrowing power it brings. There is no limit to the maximum limit amount you can borrow in asset-based loans as long as your firm has the sales and assets to back the facility.
ABL facilities come with higher interest costs, but rates have come down significantly over the years. Of course, as in any revolving facility, you only pay interest on the period of time you have borrowed funds, given that every business has inflows and outflows of cash regularly. It's superior flexible financing!
DUE DILIGENCE
While top experts agree that an ABL facility is much easier to get than a bank line, it’s important to note that a lot more due diligence goes into getting an ABL facility related to asset inspections, ongoing reporting requirements, etc. A personal credit score does not significantly weigh the overall approval decision, unlike banks, which place a significant emphasis on persona credit history and good credit score in getting approved.
CONCLUSION
Whether you're focusing on a bank line or an ABL facility its always important to deliver on a ' positive spin' on your business - that includes growth potential and getting comfortable with areas such as ratios and covenant maintenance ( the bank ), and the reporting requirements (the ' abl facility ').
With the right expertise and sound business information on your company, business credit lines don’t have to seem like entering into an extreme sport contest. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you access one of the businesses brilliant ideas – the revolving credit facility for operations and growth.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2021/Rights Reserved
