How to Use 'ABL' Asset Based Financing For Cash Flow Challenges
What is asset based finance ? That's a common question we bet from clients seeking basic understanding around asset based financing - they have heard the term, and also that it pretty well ranks # 2 , second only to traditional bank type financing.
Having an advantage in business is always good - and ' ABL ' (
asset based lending ) is fast becoming a financing of choice for Canadian business owners and financial mgrs.
ABL tries hard, and when it comes to provide commercial business credit lines that are essential to running and growing a business it's all about your assets and your sales growth.
You use the value of your working capital assets to generate borrowing capability.. on an ongoing basis.
This type of finance doesn't rely on all the ratios and formulas that come with our good friends in Canadian chartered bank commercial lending. It's in fact your company that determines your borrowing ability based on things like receivables and inventory , and that sales growth we mentioned. As sales grow so can your credit line - pretty well automatically.
Asset based credit lines tend to be there in good times and bad - many companies that are in a bit of a downturn or restructuring should also consider this type of credit line. So you business can be in hyper growth and still get access to the business credit you need.
Many companies that use this type of financing tell us that their access to credit lines has in some cases even doubled or tripled . It's pretty well 99% of the time a larger borrowing facility that you could achieve elsewhere. Many commercial lenders in ABL have a lot of industry experience in various segments of the economy.
We can't fail to mention that in some cases your bank might consider an asset based financing ABL, but it's somewhat ironic that these businesses operate within the Cdn banks and compete with bank commercial lenders.
The Asset Based Finance Plan to More Cash Flow
Typical ratios of borrowing capability are 90% of receivables and 50% or more on inventory . Don't forget also that fixed assets and even real estate can be thrown into that formula!! The cost of financing in ABL is a wide range, and depends on your facility size, overall credit profile, etc. In some cases it can be very competitive to bank rates !
From your businesses perspective you must have the ability to report regularly , at least monthly on your receivables , inventory , sales growth , etc . That's because the collateral for your credit facility are those assets and sales.
Canadian business owners should check out this newer form of business financing . Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Click Here For 7 PARK AVENUE FINANCIAL website !
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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