Being Able To Pivot Quickly Reverses The Challenges In Business line of credit challengesBusiness Line Of Credit

OVERVIEW – Information on the business line of credit in Canada . Being able to adapt to the type of facility your company needs stems from types of facility available, their cost, how they work, and the ability to distinguish between traditional and alternative offerings

Business line of credit
needs stem from needs of your business for operational and growth success. Let’s dig in.

The interesting thing about these types of facilities is that their need in effect mirrors the ‘ journey ‘ of your business. They often start out with the owner/entrepreneur struggling with the realization the current assets he or she has grown through sales have depleted cash on hand. Even worse is that traditional lending sources such as our Canadian chartered banks that place a tremendous amount of emphasis on the personal financial resources, credit history, and outside assets of the owner/entrepreneur.

That brings us to the ‘ pivot point ‘. It’s where owner/entrepreneur, or his or her financial manager must be able to quickly and expertly know where to, and who to turn to.

In the case of company credit lines it boils down to three alternatives:

Non bank ABL credit lines

Subsets of traditional and alternative lending that provide part or all of the financing need

There is no clearer requirement than the needs of a bank for approving business credit lines. It’s all about your company’s current and past financial statements, cash flow coverage, and business asset and outside collateral and positive perception of owners. Unfortunately when anyone of these is lacking it’s almost impossible to get financing approved.

For businesses at the lower end of the SME sector mundane issues such as personal credit scores and personal net worth suddenly become ‘ critical’ for bank approval.

We hasten to add that when your company can access Canadian chartered bank financing the rates and the flexibility available are quite frankly unsurpassed.

ABL Credit:

ABL (asset based lending) is the non bank alternative for the business line of credit. Here pretty well only one thing counts – assets. Both short term and long term assets are in effect ‘ combined’ into one revolving line of credit. These assets become the ‘ only ‘ collateral on your deal, not a ‘ secondary ‘ source as in Canadian banking facilities.

ABL credit is very ‘ formula ‘ driven – but for once those formulas make sense. Borrowing ability typically is 90% of your A/R, anywhere from 30-70% of your inventory, and the true liquidating value of any fixed assets.

By the way, top experts tell us that in the U.S. over 30% of that business credit line borrowing is done by ABL facility providers. While that’s not yet the case we tell clients that that trend is in fact a positive one also.

So that brings us to ‘ sub sets ‘, in effect small ‘ niches’ in working capital and cash flow financing.

They include:

Factoring / Confidential Receivable Finance

Inventory finance

SR&ED Tax credit loans

Working Capital term loans – while adding debt to the balance sheet they do in fact inject permanent working capital into your business.

All three categories of the business credit line in Canada come with different costs. ABL facilities cost more, but always deliver. Bank financing provides low cost growth financing. And when niche financing is needed for a variety of reasons or challenges our ‘ subset ‘ trio as outlined above also delivers.

Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success when you’re searching for that ‘ pivot point ‘ in business credit.


Author: Stan Prokop – 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 90 Million $ of financing for Canadian corporations . Info /Contact :


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