Tweet
The No Longer Not So Super Secret Business Credit Line ! ABL 101
OVERVIEW – Information on the asset based credit line in Canada. If your company needs a true working capital facility this just might be the solution – here’s why and how
Asset based credit line solutions are no longer that ' super secret ' answer to a working capital facility in Canada. It's the kind of solution that will help power your sales and revenue growth. Let's dig in.
It's tough to determine these days whether business owners/financial mgrs are in fact more optimistic about their future success and their ability to beat the competition in their industry. When they are in fact optimistic the reality is that they must always balance that optimism against their ability to finance both operations and growth.
Although financing continues to be one of the most serious considerations for business in Canada the alternatives are certainly not as available and obvious as they once were. That's what the Asset Based credit line in years past was quite either misunderstood or in fact unknown.
Working capital, cash flow, and cash conservation when it comes to capital expenditures top the lists of most owners/mgrs. Small and medium size business naturally has the greatest challenge, as they don't have the bench strength of larger firms. While Canadian chartered banks are certainly paying lip service and trying to, for the most part support small and medium business the reality is that the ability to finance basic growth of inventory, receivables and contracts is a challenge.
So what does the owner do when traditional bank financing can't be finalized? The reality is that more and more Canadian businesses are considering a financing solution that is becoming more developed every year in Canada - that solution is broadly referred to as an asset based line of credit, or a ' working capital facility '. The acronym for the facility is called ' ABL '.
Is there a special requirement for this type of financing - just one? Assets! Asset based lending is simply the provision of the maximum amount of cash flow and working capital that can be loaned against assets. We used the word loan. But this is not a loan or term loan, it is a revolving facility based on inventory and receivables, (and sometimes customer purchase orders) that your firm generates. The facilities only security is of course the A/R, inventory, and unencumbered equip that your company has available to finance.
The reader might be surprised to know that even the Canadian banks now have special divisions entirely devoted to ' ABL ' solutions; however some feel that their continued emphasis on balance sheet ratios, income statement ratios, and covenants and outside collateral is somewhat similar to traditional banking.
Asset based lines of credit, or working capital facilities as we have called them focus on only one thing, the collateral. These facilities are provided by independent commercial finance firms, and pricing varies by transaction facility size, the overall quality of your business risk profile, and, more importantly who you pick as a partner firm in this area.
We therefore strongly recommend that since this is a newer breed of financing that you speak to and work with a trusted and credible business financing advisor in this unique area of Canadian business financing.
So what is really happening in our facility - it is simply leverage the business assets you have on an ongoing basis to their maximum monetized value. That tends to be 90% of receivables under 90 days, as well as inventory advances of 40-80%, and on top of that unencumbered equipt is valued and advanced on if required. (Real estate is also a component, although less widely used.)
Our Nobel prize winner friend (Bob Dylan)
Investigate, and consider the advantages, and benefit from the cash flow and working capital that can benefit growth of your Canadian business. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor and check out that not so super secret business credit line solution.
Stan Prokop - founder of 7 Park Avenue Financial –
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
' Canadian Business Financing with the intelligent use of experience '
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.