OVERVIEW – Information on corporate turnaround financing in Canada. One Often Not So Obvious Solution is the Business ABL finance mechanism
Corporate turnaround business financing , simply put, involves the ‘ fixing ‘ of some major problem issues in a Canadian business. One of the best solutions for ‘ the fix ‘ is ‘ ABL ‘asset based financing. Let’s explain why, so let’s dig in.
Top experts will agree that there is nothing more challenging than a turnaround – in effect its a ‘ renewal ‘ of a business and financing will not always, but more often than not play a major role in that renewal. Going through that whole process is also a tremendous way to simply understand ‘ what went wrong ‘, and as we’ve said many times:
‘Tuition is very costly in the school of experience’
During a ‘ turnaround’ several major issues tend to always come up – they includes areas such as:
The need to restructure debt and business credit
Rightsizing the company to allow it to grow again
Address legal issues that might even include a protection filing under Canada’s CCAA process (It’s the equivalent of Chapter 11 in the U.S.)
We’re focusing mostly on the area of financing here, but it’s safe to say a lot of other issues are always going to come into play. Also we’re predominantly talking about an ‘ operating’ turnaround as opposed to some of the ‘ strategic ‘ issues involved in products, markets, engineering, etc
ABL… It’s the acronym for asset based lending helps address the 3 key areas of corporate turnaround business financing – sales revenues, cost issues, and asset management and finance issues. It’s simply one key effective solution that allows a financial restructure of the firm to be completed in its entirety.
Refinancing growth when equity issues are strained it what an asset based line of credit it all about. While more often than not it’s an operating facility that encompasses all the companies assets it can also, when applicable, include a term solution that is complimentary to the overall long term needs of the company.
It should be pointed out that typically an ABL business credit facility is a non-bank solution. (NOTE – Some banks offer ABL financing but the why and how of that is a subject for another day)
ABL will sometimes be priced as competitively as a bank solution – we will call those TIER 1 asset financing, but most firms requiring a turnaround will typically pay a major premium to bank pricing because of the inherent credit and perception challenges involved in a turnaround .
The essence of the ABL turnaround solution is the financing of all the business assets of the firm, margining their borrowing power to the maximum. Typically receivables are financed at 90% of their ongoing value , inventory is margined at anywhere from 25- 75%, and the most unique part of the ABL solution is the ability to carve out the fixed assets/equipment of the business and include them in the borrowing power mix.
Typical requirements to get the ABL solution in motion include due diligence around the business assets, the firms ability to prove it can provide ongoing financials, a long term cash flow and sales forecast , etc
If your company needs to address corporate turnaround business financing consider ABL as one method of getting the solution in place quickly. Those dwindling options you thought you suddenly emerge with a clear viable solution that’s alternative in nature but has proven to work well for thousands of firms.
Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with financing when you need it most.
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
7 Park Avenue Financial
Off. 905 829 2653
Cell 905 302 4171