OVERVIEW – Information on why the asset based ABL credit facility just might be the sort of business credit line that your business needs
Business credit line solutions can come from a method of asset based financing called ‘ ABL ‘. We think we might know why business owners/financial mgrs haven’t considered this form revolving credit facility. The reason? They haven’t even heard of it, much less considered it as an alternative. That’s why we’re ‘ pounding the table’ for some more understanding for this method of financing.
‘ABL ‘ (‘asset based loan’) is essentially a form of ‘ secured loan’. The simplest way to look at it is that it relates directly to the amount of borrowing power you have in all your assets. That borrowing power translates into a revolving credit facility.
The majority of assets that fit into the ABL credit line are your current assets – that typically includes your receivables and inventory. Over time the assets you generate in your receivables and inventory functions will of course fluctuate – so does, of course the credit line that supports these two assets.
Naturally the % that you can borrow against these two asset categories is critical. Here’s where the good news comes in as typically you can borrow up to 90% of all A/R, as well as a negotiated per cent age of your inventory.
Safe to say that some items will not always be leveraged in that credit line – for example receivables over 90 days as they are deemed potentially uncollectible. When it comes to inventory it’s a question of a careful understanding of the liquidity in the inventory – as it might be in various forms of raw materials, work in process, or finished goods. In general it’s relatively easy for your asset based lender to determine those values based on information such as inventory turns, aged receivables listings, etc.
Many firms in Canada utilize A/R factoring, which in some ways could be called a ‘ subset ‘ of asset based abl lending. However a true ABL facility is more desirable – it leverages more assets and allows you to bill and collect your own receivables. Typically Purchase Orders are not financed under a true ABL – that is a separate form of specialized finance though, and sometimes worth consideration.
True ABL’s can also easily include your fixed assets and / or real estate in your financing mix. More sophisticated transactions can potentially include a term loan as a part of the whole financing.
Asset based business credit line options compete with Canadian chartered bank finance. While often more costly they can provide all the financing a company needs to grow – thereby solving the Canadian business financing conundrum – Access to Capital! . To learn more about this solution and to determine if it fits your firm seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success.
Stan Prokop – founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years – Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Office = 905 829 2653
‘ Canadian Business Financing with the intelligent use of experience ‘
ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
7 Park Avenue Financial
Canadian Business Financing