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Is There A New Triple Threat In Canadian Business Financing?
Information on the business line of credit in Canada . Differences in bank and ABL asset based loan facilities are worth knowing for the Canadian business owner / manager
Is the ABL a real ' triple threat ' when it comes to the alternative, the bank commercial credit facility? We'll let you decide but we’re quite sure you will agree there is a market for both as you will soon see.
Oh, and by the way, the banks agree with us, because many of them, unbeknownst to many, offer their clients both alternatives. Talk about a secret we have let you in on!
So if the ultimate goal of both the ABL and the bank facility is to provide you with revolving credit, how in fact are they different? One way is simply the focus - for the bank its on cash flow and profits, while the ABL facility focuses on... you guessed it, just assets ! While our chartered banks view collateral as a back up to their credit decision the Asset based lender views your assets, the collateral, as pretty well the only back up plan.
The way bank credit lines and ABL facilities behave is partly driven by regulations. That is to say that our strong Canadian banking system is driven by rules and regulations around the amount of funds they have, what they can lend, who they can lend to . Given the fact that our banks are all pretty well public corporations on the stock market we can further imagine all the visibility around their lending that that garners!
And the asset based lender then? Well we are certainly not portraying them as drunken cowboys doing what they want and when they want, but the reality is they are not regulated, are more often than not private firms, and make their own risk ratings and decisions based on management experience and their opinion of your assets - typically A/R, inventory, equipment, and even real estate. All of those components become part of your business credit line.
Here's another little surprise we'll share with you today. When bank loans go bad they are placed in a ' non performing ' part of the banks books, a special place known as ... you guessed it ' SPECIAL LOANS '. Do you know who often refinances these loans and pays out the bank? Surprise! It's the asset based lender!
So when a company is consuming too much cash, rather than generating it the asset based business line of credit is a great business credit solution. So all of a sudden historical cash flow and profits, critical to a bank, are a non issue when you are looking for an ABL facility. Big difference!
Do we criticize our banks for their behavior .Some might, but not us, because Canadian chartered bank solutions deliver the lowest cost based on the risk they are prepared to take.
That brings us of course to pricing. In fact certain ABL business lines of credit are in fact 100% competitive, even lower than bank offerings. However, the majority are in fact priced higher, with the offset being the tremendous amount of additional liquidity and working capital your firm achieves when monetizing assets via an asset based ABL loan.
So, co-existing. Absolutely. Just be prepared to recognize the price, limitations and benefits that your firm is prepared to take one when looking for a true business line of credit. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business credit decision.
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
http://www.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 .
' 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
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