What If ABL Was Your Secret Weapon in Business Financing in Canada?

Do you believe there is a business financing tool that works perfectly when other forms of financing, traditional or otherwise will not? Is there a secret acronym for this tool? Yes, there is, it is ABL.

You know the next questions clients ask, what is ABL?! It stands for asset based lending, and it is something that just might be your best choice for financing your business in Canada.What if you have a financing mechanism that was a non bank type financing that covered all every size of business, all industries in Canada, and did not place a major emphasis on your balance sheet, income statement, profits or lack thereof! And was, relatively speaking easy to arrange.

We can hear you lining up as we speak! Let’s talk a bit about what this financing is, how it works, and cover off some key questions that clients have about costs, day to day paper flow and reporting, and the key advantages. If there is a ' downside ' to this financing we will cover off a couple of those concerns also, and we'll let you make up your own mind.So what is ABL, or asset based lending. It simply allows you to borrow, on a regular, ongoing basis, against; you guess it, ' assets '! Your assets in any business are always going to be the same and they can be categorized into a few key categories which include receivables, inventory, equipment, and, in some cases real estate.

When you are in a traditional Canadian chartered banking relationship your lender lends against those same assets, but probably not to the extent that a true asset based line of credit would provide you with. And the pre requisites for that banking facility are all two clear for Canadian business owners and financial managers - they include profitability, solid balance sheets, profits, personal guarantees of owners, and potentially external collateral. That’s now what ABL is about, it’s about only your assets, and monetizing them in a fashion that makes them as liquid as you need them to be.

A typical asset based revolving line of credit would margin all your receivables, a significant extent of your inventory, and include drawdown ability on unencumbered equipment and real estate if they in fact were available and required. You therefore only have to remember one thing in ABL lending, ' assets ' - if you have them they can be financing.

Clients always want to know if and how they qualify for such a facility. You must be in a position to provide some decent reporting around the aging of your receivables, the turnover of your inventory, and the market value of your equipment. We would respectfully suggest if you can’t do that you might not even be a candidate for staying in business, so those certainly aren’t onerous requirements.

Business that are the best candidate for this type of financing are those with high growth patterns, or firms which are coming out of a challenging period in their history . A frequent misunderstanding around this type of financing is that it is ' debt ‘. That is not the case. It is simply the monetizing and cash flowing of assets, which are accelerated by your borrowing ability and your management ability to create a further turnover, and hopefully profit around those assets.

A perfect world rarely exists in business financing - but ABL could be your solution. The two disadvantages, or potential concerns are the higher cost of this financing, as well as the additional reporting we spoke about.

Looking for a secret business financing weapon or tool to stay ahead of the competition? It just might be ABL, or asset based financing - Speak to a trusted, credible and experienced advisor in this area who can help you gain the competitive financing edge you are looking for.