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ABL Asset Finance - A Winning Business Financing Solution
Information on how the business loan strategy known as ' ABL Asset Finance ' can be utilized to run and grow your company
As a business owner and/or financial manager you are looking for business financing that makes sense. ABL is the acronym for one of the more exciting business financing alternatives that is growing in popularity every year in Canada. Are we actually saying that asset finance via an asset based line of credit is ' exciting '? We will let you decide that, but if this financing is easier to achieve than bank financing, is cost effective, and provides you with unlimited capital... well our clients are excited... you make your own thoughts on that !
Asset based lines of credit simply are drawn down by your firm based on the value of ongoing assets. The assets that are always there are inventory, A/R, and to some degree your fixed assets that aren’t already financed. By collateralizing your assets, and, most importantly, leveraging them to the max if you need to, you are creating available working capital.
We are always explaining to clients that this leverage of assets is not taking on debt, you are not borrowing on a long term basis, and you are simply monetizing current and fixed assets based on current values. What are those values, typically they are 90-100% of receivables under 90 days, 40-75% of your inventory, and a liquidation type value on any equipment you want to temporarily monetize. Clients always ask - ' Do you mean that we can borrow, if we need to, on a temporary but ongoing basis on our fixed assets?". The answer is yes, if you are considering this type of financing strategy.
Let’s cover off the two key points clients always tend to focus on when they are investigating this unique business loan strategy- namely costs, and timelines to get the working capital facility in place.
In some ways cost is the most difficult area of explanation and investigation in an asset finance working capital facility. Putting aside the normal due diligence or commitment fee required to get a facility in place the reality is that there are a couple of key drivers that affect pricing . Asset finance revolvers can be just as competitive as a Canadian chartered bank financing (and less onerous to get approved) but prices varies all over the board in Canada because of the fragmented and specialized nature of this type of financing.
Typically we see rates as low as 9% per annum and as high as 1.5% per month. That’s a big spread and ultimately it depends on the size of the facility, the mix of your current assets, as well as any perceived industry or business risk associated with your firm. But again, we remind the reader, what price would you pay for unlimited working capital?
Typically it takes 2-4 weeks to close such a facility. In Canada as we noted the market is fragmented and these lenders are very focused, specialized, and by nature experienced in what they do, which is value your assets and finance them!
Speak to a trusted, credible and experienced Canadian business financing advisor around asset finance as a business loan strategy if your working capital needs ' aren't working ' now!
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
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 100 Million $ of financing for Canadian corporations .
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
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