Eleventy Jazillion Ways To Finance Your Company : But This One Works
OVERVIEW – Information on asset based lending in Canada . Know alternatively as ‘ ABL ‘ this form of line of credit financing is the business bank alternative to working capital and cash flow financing.
Asset based lending in Canada provides Canadian business borrowers with a ‘ one stop ‘ solution for their line of credit needs. Also called ” ABL’ for short, it’s a business bank alternative. Let’s dig in.
Although business borrowing costs are at all time lows the main reason business owners/financial managers consider ‘asset based’ credit lines is simply the flexibility and additional borrowing power they provide for your business. It’s a welcome relief for firms that can’t always access any, or enough Canadian chartered bank financing.
By the way, some of the most recognized and large firms also use ABL credit lines if only for that same flexibility they provide. They have made the choice to replace bank borrowing with commercial finance borrowing even though they categorically qualify for bank credit.
Sizes of asset based credit lines range from 250k on the low end to tens of millions on the high end, with numerous players – both Canadian and U.S. based providing Canadian borrowers with these facilities.
Cost is of course always a discussion point when it comes to business borrowing. Although large credit worthy firms can borrow almost at the same or better prices than bank offerings the truth is that the majority of ASSET CREDIT facilities will always be more expensive. It’s a case of balancing costs against the benefits of all the financing you need for working capital and cash flow based on your revenues and assets. As with any type of business financing you have to balance costs with access to capital and flexibility, as well as the time it takes to get approved. (ABL financing can happen in a matter of a few weeks if the borrower has all the proper up to date financials and asset lists)
Because the asset based lender uses very clear formulas based on your receivables, inventory, and equipment your borrowing power will always fluctuate with your needs. Typical ABL collateral financing is 90% for receivables, and pre determined generous formulas for inventory and equipment based on their real world value.
In some cases firms also used asset based credit to acquire a competitor or re-arrange existing debt. In other cases ABL is simply a temporary bridge loan to get your company to where it needs to be without taking on more debt .Business owners/mgrs quickly pick up on the fact that if sales are growing and there are receivables and other assets to back them up they have just discovered they now have all the financing they need.
Canadians are always recognized as being conservative – if only for that reason some firms never check out asset based lending as a good choice for their business – for whatever reason they associate not having bank financing in place as a stigma. Not the case these days as many forms of alternative finance are in fact the new ‘ mainstream’.
Let us not forget ratios and covenants. ABL lending is either covenant or ratio light, or non existent. It’s your assets that back up the facility – not ratios. Banks love ratios! In fairness though reporting requirements are often more stringent when it comes to ABL borrowing. So be prepared to provide updated A/R, inventory and payable agings on an ongoing basis. Monthly is an absolute minimum but weekly reporting might also be required. It’s the trade off you make for the non bank alternative.
If you’re looking for someone who understands your business borrowing needs and you finally want to choose a non business bank alternative 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 your borrowing needs.
7 Park Avenue Financial :
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 100 Million $ of financing for Canadian corporations . Info /Contact :
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Office = 905 829 2653
7 Park Avenue Financial
Canadian Business Financing