What’s Different About Asset Based Lending Line Of Credit Capital ?
Information on the commercial revolving capital facility known as the ABL asset based line of credit . What are the advantages and differences of this facility to a bank business line of credit .
If you speak to Vince Lombardi or Charlie Sheen winning is apparently everything. We're not sure that applies in business all the time, but we think we can prove to Canadian business owners and financial managers that an ABL asset based line of credit is as close to the perfect ' winning ' commercial revolving credit facility that you can obtain. Here's why.
An ABL firm is a business to business lender - yes we know that Canadian chartered banks are also that... but they are operating under a totally different set of rules. That is why small, medium and even the largest firms in Canada utilized asset based lines of credit for working capital and cash flow financing.
The essence of an ABL is the financing, to the maximum amount possible, of your receivables and inventory. Medium and larger firms can actually include a healthy component of fixed assets and real estate into that mix.
The extra financing capability that your firm receives from an asset based line of revolving credit (versus the traditional bank facility) gives you choices. What are those choices? Mostly good things - expanding your business... acquiring a competitor or peer, working thru a turnaround scenario. or simply restructuring to get your firm where it needs to be.
But can't we get the same sort of opportunity via a Chartered bank in Canada? ask clients. In fact we agree that commercial credit and lending in Canada via our chartered banks is in fact on the rise, all recent stats back up that statement. However, 2 simple issues come to mind when we talk over these financing challenges with clients - Would you in fact be approved for a facility via a traditional commercial revolving line of credit... and, as germane, would your company get all the financing it needs.
The hard core reality is that many firms we meet actually find themselves out of favor at the bank, they are either ' capped ' to a pre set limit , or find themselves in the very ' unspecial ' feeling that comes from finding yourself in Special Loans . (Trust us on that, special is taken out of context in this financial term in Canada!)
We do agree with clients that in many cases, when all things are equal, bank facilities might seem cheaper from a short term commercial line of credit.
Actually, in numerous instances an ABL asset based line of credit can actually be cheaper than the bank, roughly the same in pricing, or in a lot of instances more expensive financing... but... and its a big but... you have to weigh the fact that ABL delivers more borrowing power allowing you to enjoy discounts with suppliers and to purchase more effectively.
Any commercial or revolving line of credit that allows you not to have to give up ownership percentage is in fact always cheaper than the reality of looking to equity financing, a partner, merger, etc.
In ABL financing your higher borrowing capability comes with only two requirements essentially, you have to have the assets to borrow against, and you must have reasonable financing and reporting controls to validate the significant amounts you are now borrowing.
If you want to explore ABL asset based lines of credit as a solid alternative to funding your company, either temporarily, or permanently speak to a credible, trusted and experienced Canadian business financing advisor who will work with you on an ABL relationship that makes sense.
Stan Prokop - founder of 7 Park Avenue Financial -
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/abl_asset_based_line_credit_commercial_revolving.html
Appreciate your note, thanks.
ReplyDeleteStan