Today’s Brilliant Idea : Business Credit Line Flexibility Business Credit Lines

OVERVIEW – Information on the right type of business credit lines in Canada for growing businesses . A revolving facility is needed to finance current asset growth for maximum business decision flexibility

Business credit lines
provide ‘ flexibility ‘ when it comes to financing your business. A revolving facility provides business financing when new equity or taking on debt aren’t the preferred method of growing your company. Let’s dig in.

If the Canadian business owner / financial manager accepts they need such financing why then does it seem like an ‘ extreme sport’ challenge to achieve success in this area. Don’t forget also 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, as well as to be key in an business restructuring.

We’re still surprised that a large contingent of Canadian business 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 lines of credit. 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 .

How does the actual borrowing ability compare between bank credit and commercial based loans. While banks traditionally margin A/R and receivables at 75% the asset based credit line typically starts out in the 90% range.

And while banks are somewhat reluctant to finance inventory when they do the borrowing margins are somewhat conservative. So how does the asst 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 A/R and inventory the ABL line can deliver in many cases 50-100% more cash flow borrowing power.

Any established business with a clean balance sheet, profits, and several years of history, and marginable assets can apply for a bank credit line. Typically ABL facilities tend to start in the 250k range and can 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.

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 as it relates to asset inspections, ongoing reporting requirements, etc.

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 reporting requirements ( the ‘ abl facility ‘) .
With the right expertise and good 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 with a track record of success who can help you access one of businesses brilliant ideas – the revolving credit facility for operations and growth.

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:


Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171


7 Park Avenue Financial
Canadian Business Financing