The ‘ A ‘ In The ABL Business Credit Line Stands For : Assets !

Waiting For The Amazon Drone To Deliver Your Business Credit Line ?

OVERVIEW – Information on the business credit line commonly called ‘ ABL ‘. Here’s how your business assets deliver on liquidity and cash flow




Your business credit line probably won't be delivered by the Amazon drone that we all read about the other day. If that's the case, one option for the Canadian business owner /financial manager to consider is the ABL solution. Let's dig in.

And yes, that ' A ‘in ABL does in fact stand for ' Assets '. It's your ability to leverage ' ALL ' of the assets in your business in order to fully achieve maximum financing capability.

The normal comparison here is ABL vs. your Chartered Bank revolving business credit facility. The simple way we explain this to our clients is that our chartered banks, in their wisdom, have chosen to focus on past historical performance, and quality of cash flows and debt to equity measurement.

That's all fine of course; but your asset based lender is laser focused on predominantly one thing - you guessed it - ' ASSETS'!

We are always conscious of being ' bank bashers '

- we're told it’s the Canadian way in business we suppose. No one supports banks more than us, so if your company can demonstrate:

Profits
Quality Tangible Collateral
Acceptable ratios and covenants
Outside collateral/owner guarantees
Reputable cash flows/ business projections

it's safe to say you are very close to achieving full bank approval for all the capital you need.

When all those criteria cannot be met the best way to achieve business credit line delivery is potential the ABL - i.e. a non bank asset based line of credit.

While negative issues will certainly be discussed in your negotiations on your ABL credit facility reasonable heads will often prevail because of the past experience of the ABL lender in your industry.

If there is one absolutely obvious benefit to asset based credit lines it’s your ability to borrow more than a bank facility. Let's use the example of a company in the SME sector that has $1,000,000.00 level of receivables. Typically a bank will lend 750k against that ongoing balance; but the ABL lender is often as comfortable in lending $ 900,000.00 in our same example.

While many banks struggle with inventory loans as a component of the credit line the right ABL lender will take the time to analyze the various components of your inventory ( raw materials, work in progress , finished goods ) and determine a borrowing level that is typically 25-75% of the total value .

Rarely is any Canadian business financing a ' slam dunk '. In the case of the ABL business credit line the business owner/manager should expect both a higher borrowing cost and some real due diligence on your firm, including in house visits, inspections, potentially an appraisal, etc.

While many chartered bank facilities may require you to report quarterly or annually on your performance the Canadian business owner/manager will be expected to submit a minimum monthly package of financials, assets, payables, etc.

So is the ABL business credit facility for your firm? Evaluate the option by seeking out and speaking to a trusted, credible and experienced Canadian business financing advisor with a track record of success in credit lines tailored for Canadian companies.



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 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.

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7 Park Avenue Financial = Canadian Business Credit Line Expertise







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Stan Prokop