How Does Asset Based Lending Work?

 

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YOUR COMPANY IS LOOKING FOR  AN ABL ASSET BASED CREDIT LINE FACILITY!

The Future of Business Financing in Canada: Asset-Based Lending

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The Power of ABL Facilities: Guide to Asset Credit Line Solutions in Canada | 7 Park Avenue Financial 

  

Unlocking the Power of ABL Facilities: A Guide to Asset Credit Line Solutions in Canada  

 

 

Introduction

 

In alternative financing, Asset-Based Lending (ABL) facilities stand out as a robust solution for Canadian businesses across the spectrum—be it startups, SMEs, or large corporations.

 

Notably, despite ongoing debates in leading financial publications like the Globe & Mail and Financial Post about the state of business credit in Canada, ABL has proven to be a beacon for those struggling to meet the stringent criteria set by traditional financial institutions for working capital borrowing needs.

 

This article aims to demystify ABL facilities, emphasizing why they're increasingly becoming the go-to resource for savvy Canadian business owners.

 

 

What is ABL and Why Does it Matter in Canada?

 

ABL, or Asset-Based Lending, involves consolidating various business assets into a single credit facility. This unique arrangement accommodates new ventures and is a hit among growing and mature companies.

 

Despite the prevailing perception that Canada is flush with capital, the reality at 7 Park Avenue Financial reveals a different story: Businesses frequently approach us in search of feasible financing solutions.

 

The Canadian Context

 

Canada certainly ranks higher regarding financial stability in the grand scheme of global economies. Yet, the needs and complaints of Canadian business owners can't be ignored. ABL is a versatile tool, enabling operational finance and facilitating the acquisition of competitive businesses by leveraging existing assets for more capital.

 

The Advantages of ABL Over Traditional Lending

 

Traditional lending avenues like banks often fall short when addressing businesses' varied needs. They impose a gamut of prerequisites, from solid balance sheets and profits to collateral, which many companies find challenging to fulfill.

 

The Allure of ABL

 

The popularity of ABL financing has surged because it concentrates more on your business's tangible assets and revenue streams rather than exhaustive paperwork and financial history. It's worth noting that in the U.S., ABL accounts for nearly half of all business credit lines!

 

Its growing prevalence in Canada underscores its effectiveness as an innovative business finance solution.

 

The Core Differences: The 'Naked Truth'

 

The first significant advantage of ABL is the higher margin of assets, allowing for an elevated level of borrowing. This is particularly beneficial for inventory, which traditional lenders may overlook. Secondly, the asset based line of credit focus focus shifts from cash flow covenants to asset valuation, thereby making it more accessible to a broader range of businesses in Canada.

 

Operational Flexibility and Reporting in ABL

 

Asset based lines of credit offer unparalleled flexibility in accommodating the fluctuating financial needs of your business. However, it's essential to maintain detailed monthly reports on the company's assets eligible accounts receivable, inventory levels, physical assets,  and sales to sustain the ABL facility. This reporting framework also gives businesses insights, aiding in more informed decision-making.

In certain cases, intellectual property may be included in the facility, as can commercial real estate.

 

Conclusion

 

Asset-based lending could be your way out if you find yourself handcuffed by traditional financing options.

As a solution tailored to diverse needs, ABL focuses on leveraging your existing assets rather than restricting you with inflexible criteria.

 

To fully understand the ins and outs of ABL financing, call  7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor -we're ready to offer you the unfiltered truth about how ABL can unlock new growth avenues for your business.

 

FAQ

 

  

What is Asset-Based Lending (ABL)?

Asset-based loans (ABL) are a form of financing where your business assets, such as inventory, receivables, and equipment, serve as collateral for a  revolving line of credit. This allows you to maximize your borrowing power based on your assets rather than traditional credit criteria.

 

How does ABL differ from traditional bank loans?

Traditional bank loans as the primary banking relationship often require a strong balance sheet, good credit history, and even personal guarantees as well as financial covenants. In contrast, an asset based loan focuses on your tangible assets such as eligible receivables as the primary basis for financing, allowing for higher borrowing levels when a business draws funds,  and with more flexibility.

 

Is ABL only for large corporations or can small businesses also benefit?

 

ABL is beneficial for businesses of all sizes. Asset based lines of credit can be customized to meet your specific financing needs, whether you are a startup, a growing SME, or a large corporation.

 

What types of assets can be included in an ABL facility?

The ABL facility asset credit line can include different assets for eligible collateral, from accounts receivable and inventory to equipment and real estate. This diversified approach to collateral gives you a broader borrowing base for firms with substantial assets that can't meet bank credit criteria that often come with a financial covenant list!

 

Highly liquid assets such as receivables and inventory receive a higher borrowing margin, almost always higher than bank margins if they have an existing line with a bank or other commercial finance firm.

 

Are there any reporting requirements for maintaining an ABL facility?

Yes, asset based lenders usually require you to submit regular reports on various business metrics like inventory levels, sales, and accounts receivable. This helps the lender assess your current financial state and empowers you to understand better and manage your business.

 

 

How quickly can I get approved for an ABL Facility?

The speed of approval for an Asset-Based Lending facility can vary depending on the lender's requirements and the complexity of your financial situation. However, since ABL focuses on tangible assets, the approval process is often faster than traditional loans, sometimes taking as little as a few business days.

 

What are the interest rates for ABL compared to traditional loans?

 Interest rates for Asset-Based Lending facilities may be slightly higher than those for traditional bank loans due to the perceived risk associated with asset-based financing. However, the added flexibility and speed of access to capital often make ABL a more attractive option for businesses needing quick liquidity.

 

Are there any industries where ABL is particularly advantageous?

Asset-based lending is versatile and can benefit various industries, from manufacturing and retail to healthcare and technology. Businesses that have a significant amount of tangible assets like inventory or machinery will find ABL particularly advantageous.

 

Can ABL facilities help businesses going through restructuring or turnaround?

 

Asset-based lending can be an ideal solution for businesses undergoing restructuring or a turnaround. Traditional lenders may shy away from such scenarios due to perceived risks, but ABL focuses on assets, providing the necessary capital to navigate through challenging periods.  

 

Click here for the business finance track record of 7 Park Avenue Financial

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Asset Financing Solutions in Canada - The New Financing Alternative

Asset Based Lending in Canada ( ABL ) ; What’s all the excitement about? As we are well into our 2020 business year in Canada the financial markets continue to provide challenges to Canadian firms in the small to medium enterprise sector ( ' SME ' ) for a variety of reasons, one of which is a Pandemic!

At 7 Park Avenue Financial we define SME as Sales revenues less than 50 Million dollars, but you will find a number of people with different size definitions. Suffice to say our numbers are smaller than those in the U.S, as usual!

WHAT IS ASSET BASED LENDING?

ABL financing is simply collateral-based lending - It secured inventories, A/R, equipment, and other property your business owns, such as real estate for example. Canadian businesses use asset based lending to cover short term solvency  issues to run their businesses - it is often termed as ' transitional financing '.

Working capital and cash flow financing challenges seem to be a constant source of challenge for the Canadian business owner and financial manager. When we combine that challenge with the fact that many companies have debt and debt service problems, and in many cases are coming off a bad year ( the worst year ever? ) you can see how any new financing solution very quickly becomes top of mind. If the Canadian business owner is confident that his liquid and fixed assets as a whole can support the financing need careful thought should be given to an ABL arrangement.

ABL is the term most people refer to when discussing ABL FINANCE if they have a financial background.

SPECIAL CONSIDERATIONS  

So what are those liquid and fixed assets – well they are of course the company’s liquid current assets, receivables and inventory? That is also balanced with the firm's fixed assets and real estate might be included in that. Whether on the U.S. or the Canadian side of the border the asset based lending lines of credit continue to increase – some of the largest corporations in Canada and the U.S. have either completed such financings or are contemplating them. ABL in Canada grew out of the tremendous growth in the U.S. asset based lending industry.

HOW CAN YOUR BUSINESS GET AN ASSET BASED LOAN

As large as the market and market potential are in asset based financing it is interesting to note that the actual market participants can really be brought down to a handful or two of key players. There are some large tier one type firms that are primarily offshoots of major U.S. corporations who dominate the market in asset based lending, and then there are a very small handful of Canadian well-heeled players.

That is finally balanced by a similar handful of Canadian tier 2 and tier three players who play in niche markets and geographies. Asset based lending works only when there are... guess what... ‘Assets ‘! As such industries that are very capital intensive in nature – think manufacturing, etc... Are perfect candidates for ABL type arrangements?

HOW ASSET BASED LENDING WORKS

Asset based financing is essentially an operating loan and line of credit that allows Canadian firms to meet everyday cash flow demands as they operate the business. As there is often a significant delay in the final collection of receivables your business needs cash flow to cover that gap. For companies that can't demonstrate ongoing historical cash flow from operations the collateral in the assets of the business provides business capital to run and grow a business.

WHAT ASSETS CAN BE USED TO SECURE A LOAN ?

Asset based loans and lines of credit are typically tailored to a company's specific needs. There is kind of a hierarchy of priority in assets that ABL LENDERS prefer. More liquid assets such as your receivables and inventory receive high borrowing margins, but other assets also command good borrowing ability - sometimes dependent on appraisals, etc. Borrowers familiar with traditional bank covenants and formulas will be happy to know that those restrictive type of covenants in finance rarely occur in ABL lending.

In the past there was a major stigma in the asset based lending marketplace that this type of financing – i.e. leveraging your current and fixed assets to the max, is a form of alternative financing that was previously embraced by only firms who were in some sort of financial trouble or distress.

While a firm can have financial losses, a poor balance sheet capital structure, or cash flows that are very volatile or seasonal and still be a great candidate for an asset based line of credit /loan, it should be pointed out that major successful well-known corporations have added ABL financing to their financing toolkit so to speak.

 WHAT DOES ASSET BASED FINANCING COST VS BANK FINANCE?   PROS AND CONS OF ASSET BASED LENDING

When CFO’s and business owners meet with chartered banks to structure operating and term financings the discussions revolve around balance sheet ratios, debt covenants, cash flow coverage, and personal collateral. When all of those issues are generally positive in nature the Canadian chartered banks are providing lines of credit and term facilities at very low interest rates.

For the ABL lender it is simply a lending decision around the lenders ability to convert collateral to cash under the ABL facility. While asset-based lending interest rates are almost always higher than traditional bank financing rates have come down significantly and the final cost of borrowing will depend on the overall credit profile of your company and industry, as well as its current financial position and years in business.

When there are major challenges in satisfying bank requirements those ratios and loan covenants are not on the discussion table with your asset based lender, only the liquidation value of all your assets is. Receivables and inventory in most firms are of higher quality and can be margined in the 90% range, while appraisals are performed on other fixed type assets. That gets your company maximum asset financing, and that is what ABL is all about.  Real estate owned by the company can also be part of the asset mix.

Is it more expensive than traditional bank financing – we would say 95% of the time it is. But as a business owner do you want no or a small credit facility at a great rate or all the financing you need at a more expensive rate? Asset based lenders have a thorought due diligence process around your financials and the assets that ultimately finalize a term sheet / offer to finance. Canadian companies looking for SME COMMERCIAL FINANCE solutions and who have business assets are eligible for asset based financing loans.

Whether your business is a major corporation of an up and coming startup it's cash flow that is like ' gasoline to a car '. Operations must be funded and working capital financing must be conserved and maximized. Thousands of companies cannot satisfy ' cash flow based loans ' and are unable to demonstrate past and future cash flow generation. That is one of the main reasons why asset based financing works.

 CASH FLOW VS ASSET BASED LENDING - WHATS THE DIFFERENCE ?   

Companies that have bank financing in place for cash flow based borrowing are subject to potential reductions in their business lines of credit when their profits drop due to company-specific of general economic issues. On the other hand firms that borrow using ABL finance have the assets on their balance sheet backing up collateral for loans and lines of credit - cash flow is really a secondary consideration for the ABL lender.

ABL credit lines are formed by a percent of the value of your total assets, and facilities typically grow automatically as sales and assets grow !
ABL allows you to leverage assets and is often an intermediate step back to traditional bank financing for many companies; it's flexible and is often used in conjunction with buying a business or is part of a TURNAROUND FINANCING and a restructuring or refinancing strategy.

Various types of asset based financing such as inventory loans, purchase order financing and factoring ( pledging accounts receivable) form part of the ABL solution .For information on PO FINANCING click here , and for an understanding of how factoring works click here.
  
CONCLUSION  

Asset based lenders allow companies to borrow money based on the liquidation value of assets on its balance sheet. A recipient receives this form of financing by offering inventory, accounts receivable, and/or other balance sheet assets as collateral. While cash flows (particularly those tied to any physical assets) are considered when providing this loan, they are secondary as a determining factor.

They are fast flexible solutions outside of traditional financing and banking covenants. Ensure you are aware of this newer financing alternative – now it's your turn to decide, so talk to a trusted, credible and experienced Candian business financing advisor to see if asset based financing will work for your firm.





7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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 '

ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Business As Unusual - Asset Based Lending Works Because Its Business As Unusual !

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Eliminating The Tough Road In Accessing Business Credit Lines

Business line of credit needs may often require the business owner/financial mgr look beyond the ' norm' associated with revolving credit lines. That's where ABL asset based lending and revolving loans come in - they're the viable bank alternative. Let's not forget though that bank facilities of this type offer low cost and flexibility if they can be accessed. Let's dig in.

An ' ABL ' is the acronym for the non-bank business credit line via the asset based lending solution. With the focus on using your assets as collateral the true ' borrowing power' of the facility provides your firm with a flexible cash flow solution based solely on the balance sheet assets. The facility actually suits every type of company but is often most successful for firms that have uneven financial statement ratios, fluctuating profits, and cash flows that might not resemble true operating cash flow performance.

Many companies, but not all as we've mentioned, used the facility to facilitate a turnaround or restructuring around their overall capital structure when that is mandated by owners or lenders! Many firms that are financed by Canadian banks might find themselves on the wrong side of covenants and ratios that often can only be solved by a new third party solution.

Solutions around asset based revolving lines demand that your firm has a good handle on your overall cash conversion/business cycle. That knowledge, combined with the ability to borrow a higher amount on your overall collateral will deliver the proper turnaround in your business finances. In some cases true asset based lenders will also consider term debt if it is appropriate and feasible.

WHY CONSIDER AN ABL BUSINESS CREDIT LINE / REVOLVING CREDIT FACILITY?

Many new clients at 7 PARK AVENUE FINANCIAL aren't fully aware of the differences in ABL loans as compared to bank credit or other facilities. They have found via experience that bank credit is difficult to get given the personal guarantees, covenants, and other obligations Canadian chartered banks might impose. Accessing all the bank credit you require can easily become a full-time job! As one of our mentors used to say ' tuition is very expensive in the school of experience '!


There are a number of reasons why your firm might consider an ABL revolving line. Some of these reasons might include:

ABL Finance will provide significantly more, and immediate liquidity to the business

Firms that might be under a cash flow crunch or constantly facing bulge financing needs due to issues around seasonality, etc will find themselves fully financed

Asset based credit lines tend to almost automatically grow as your revenues rise Growing sales requires constant replenishment of working capital due to the build-up your investments in receivables and inventory consistent with any company with growing sales.

ABL financing is 'covenant friendly', with asset based lending companies place much less, or even no focus on debt to equity ratios, financial leverage, outside collateral, etc ( ABL Lenders can do this as they constantly update your overall all asset coverage around aged payables, receivables, fixed asset lists, etc - The software and reporting mechanisms ABL lenders use provides them with a total update on how your firm is doing


In summary, asset based lenders who feel comfortable with their asset security, as well as your firm's ability to provide regular updates on performance, provide a significant amount of liquidity into the Canadian business financing landscape.

Are There Disadvantages To The ABL Facility And A ABL Revolving Line Of Credit?

99% Of the time asset based lending will always cost more than traditional bank financing. The bottom line interest rate and the focus on continual reporting is the tradeoff your firm gets from it's access to maximum liquidity. However, similar to bank financing the ABL environment allows you to pay for only the credit you utilize. ABL lenders have a higher cost of financing as they are typically financed privately and have higher costs around the monitoring of collateral and reporting.


Fundamentally it's all about the cost of financing benchmarked against the ' risk ' associated with your firm or its industry. It's at these times that looking at alternatives make sense.


Revolving credit facilities are primarily used for growth; and in some cases they are a solid re-financing alternative.

HOW DOES THE ABL BUSINESS LINE OF CREDIT WORK? THE REVOLVING CREDIT AGREEMENT

The ability to constantly access and drawdown working capital/cash flow needs is the key attraction of securing the proper line of credit facility. The assets that make up and drive this type of business credit are:


Receivables

Inventory

Equipment / Real Estate (if applicable)


As these two ' current asset' levels rise and fall so does the line of credit accessibility. Technically speaking the bank, or the asset based line of credit provider determine your firms access by establishing what they call a ' borrowing base' - typically on a monthly basis


In the case of a bank facility, typical margins against these two assets are as follows -


A/R = 75%

Inventory - 50% (varies)


The asset based lenders who provide lines of credit typically offer higher margin borrowing:


A/R - 90%

Inventory - 50-75% - (varies)


We can with confidence and experience say that asset based non-bank credit lines, while more costly, almost 99% of the time offer more borrowing power.

True revolving facilities are the most typical credit line - your firm draws down on the facility and then pays the facility down as you collect receivables and generate cash. The facility ' revolves ' - hence the name 'revolver'. The key drives of that ' revolving ' tend to be the turnover over inventories and collection of receivables as the company completes its sales cycle.

Many industries find themselves perfectly suited to asset based credit; examples might be distribution companies, manufacturers, distributors, etc.

In current times many firm are service or software-based , and these firms focus on the collection of a/r or their ability to contract clients via recurring revenue streams. When you set up your facility with the asset based finance company you will mutually agree on a ' borrowing base ' which will identify the maximum you can draw down at any time. Revolving credit facilities make the most sense economically when they ' revolve ' allowing you to minimize borrowing costs which at the same time being able to access capital when you need it.

This is why good attention to your inventory turns and DSO ( the key measurement of receivable turnover ) are so critical for the ownership/management team.

Asset based lenders use bank lockbox agreements to allow them to control the overall facility and ensuring the funds you receive are used to constantly pay down the facility. Over time your ability to have the facility ' revolve ' properly will have a key place in determining facility size, rates, collateral monitoring, etc.

If your firm has a good relationship with your lender you can often negotiate an ' over adance ', allowing you to temporarily ' over-borrow ' above the approved facility size. In these cases we always recommend clients be prepared to put together a realistic cash flow projection based on the current situation and needs of the business. Those situations might arise out of the ' seasonality ' in your industry, or your ability to take advantage of special vendor pricing, etc.

One other possibility surrounding this type of facility is the potential for the asset based lender to include a ' term loan component ' in the overall structure of the facilities. Payments can be adjusted to be made separately on the loan or also utilizing the ' balloon repayment ' scenario, allowing for the loan to be collapsed when the facility is paid out by another lender.

 Suffice to say good asset coverage is required in these latter two scenarios. Although almost all Canadian banks have an ' ABL ' division Canadian borrowers will always struggle with the concept of trying to understand the difference between bank ABL and non bank ABL.

In the U.S. ' second liens' are popular, allowing lenders to be 2nd on charges of equipment already secured by another lender; this practice is very uncommon in Canada. When banks do provide ABL loans in Canada their rates are often considerably better than their non-bank counterparts - however minimum loan sizes are often in the 5-10 Million range and upward. Banks will take a more extensive look at a multitude of factors in these larger ABL loans such as overall credit quality, pricing, and the company's ability to comply with the operational aspects of loans.

It is safe to say though that on balance there is more lender risk in asset based loans given constantly changing assets of the borrowing firm, along with major fluctuations in cash flow and often struggling working capital ratios, which is why various conditions will be imposed by a Canadian bank or non-bank LOC provider. We can (again) say with confidence (and, again experience!) that conditions imposed by asset based lenders are less onerous and more flexible. To some extent the actual limit on the line of credit can almost automatically increase without further applications, etc


What then is the bottom line of your firm's search for revolving lines of credit? The key points include:


Consider the entire funding landscape currently available in Canada


Be open to looking at both bank and non-bank solutions - aka ' traditional' versus ' alternative’


Have a strong sense of your working capital and cash flow needs


Ensure you have the data to allow a bank or non-bank lender to consider the credit facility - typically that's financials, aged receivables, inventory, payables, etc

ALWAYS BE OPEN TO A PLAN B!

In certain cases your company either may not be eligible for an asset-based credit line. There are numerous other solutions that can provide a similar type of liquidity including accounts receivable credit lines, purchase order financing and inventory loans, sale-leaseback scenarios, factoring loans, etc. Each of these types of facilities has different pricing and benefits attached to them.

Certainly a sole accounts receivable line of credit is always more achievable and can meet the needs of many firms, particularly those with smaller facility size requirements. Although there is no hard and fast rule our experience at 7 Park Avenue Financial is that for firms requiring facilities less than 500k these secondary solutions we have highlighted will often do the job, particularly if your firm doesn't qualify for a true ABL through a commercial lender or the bank.

Solutions such as the factoring line of credit are easily put in place, so business owners and their financial mgr's should always investigate types of asset-based financing.

These secondary types of offerings, versus the operating line of credit, are generally easily accessed, and certainly, approvals are more quickly put in place.

In summary, if you’re focused on shortening the journey on the tough road to business cash flow and working capital financing consider all options, including speaking to a trusted, credible and experienced Canadian business financing advisor who can assist you with funding needs... that deliver.





7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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 '

ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial





Stan Prokop


7 Park Avenue Financial/Copyright/2020

A Business Line Of Credit In Canada : It’s True That ABL Revolving Lines Deliver !

How Does Asset Based Lending Work ?

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Why Use Asset Based Lending ? It Works

The asset based credit line is a key part of alternative financing options available to Canadian businesses. As simple as the solution is ( i.e combining all your business assets into one borrowing facility ) it just might be the perfect solution for businesses that can't access any, or all, of the business credit they need in Canada.

It is interesting to note that this revolving facility is perfect for new, growing, and even large mature corporations , many of whom use the facility now days. When it comes to SME COMMERCIAL FINANCE needs business people would be surprised as to how many firms use this type of business finance.

There's probably no agreement on actually how tight business credit is or isn't in Canada - that debate constantly rages on . We continually read in both the GLOBE & MAIL and FINANCIAL POST that Canada is awash in capital, but here at 7 Park Avenue Financial we encounter clients with borrowing needs everyday, many of them dissatisfied with traditional access to business credit.


Naturally it goes without saying that Canada, despite the complaints of the Canadian business owner and financial manager, is probably in better shape than many other countries.

Asset based financing can be used for a business credit line, as we have noted, or also as a financing vehicle for purchasing a business or competitive business. It used the leverage in your assets to monetize your cash flow needs .

The ability of a business to fund both it's operations as well as growth is key to any level of business success. When it comes to banks and other more ' traditional ' lenders thousands of businesses can't meet the credit quality criteria that is required by these lenders.

So why has asset based lending gained such a dominant foot hold in the Canadian business landscape. While chartered banks have great rates and virtually unlimited amount of capital to lend many companies don't have the balance sheets, profits, and outside collateral often demanded by our banks, who for all the right reasons are more conservative in their lending practices.

So for that reason alone thousands of firms have gravitated to asset based finance solutions that focus on your assets and sales levels. As an interesting aside asset based lenders provide close to half of all of the business credit lines in the U.S. - So it is not hard to see why ' ABL ' facilities are growing in Canada - where relatively speaking it's a newer business finance solution.


So why consider ABL financing ? Simply if your firm can't meet traditional lending criteria and you still have assets and sales it allows you to harness new borrowing power .


Yes of course those same assets are being margined, just as your bank would have, but there are two major differences, we can call them the core of our ' naked truth ‘.



How Does Asset Based Financing Work ?


First of all your borrowing levels are raised significantly because your assets are margined at a higher rate , and the inventory component of margining is very aggressive, where in some case a bank facility might not even address that asset at all, or at lease only nominally .

Asset based credit lines also can include your equipment and real estate, if applicable, as part of your new borrowing power - bottom line : increasing borrowing power of your company .

And what about that 2nd difference or truth? It's a key point, in that the focus on ABL approval is not cash flow coverage and covenants, its just mainly about assets, which has great appeal to Canadian borrowers, especially those that struggle to meet those cash flow covenants imposed by traditional lenders.


Quite often we see tremendous flexibility in the size of such a facility, because in many cases business has peaks and valleys and bulges in financing requirements.

We don't consider it a drawback necessarily, but most asset based business lines of credit have your reporting on your monthly levels of a/r, inventory, sales, etc, allowing the ABL lender to monitor and justify your borrowing needs. In many cases we have seen that it allows companies to understand and run their business more successfully.

That then is some of the naked truth in this asset credit line .It's a part of the new reality of Canadian business financing that you should take a serious look at, especially if things are not working well now .

Speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success - Get the stripped down truth on the Asset Based Lending advantage .

Looking For Asset Financing ? Looking To Double Your Business Credit Line?

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Business lines of Credit that Work !

Information on a business line of credit known as an ABL facility via an asset based lender . This type of asset financing can double your access to business credit and working capital

You're on the hunt, and the prey is business financing under an asset financing scenario you have heard so much about. Let’s examine what an ABL facility is, who is the asset based lender that offers this financing, and, oh yes, do you qualify?

To say that business credit financing is top of mind these days with Canadian business owners and financial managers is clearly an understatement. With the economic clouds clearing on the horizon after the 2008-2009 business credit meltdown business owners are looking for growth financing.

And the reality is that the type of operating facilities that you are looking for are getting tougher to secure from Canada's major chartered banks. We are of course referring in general to firms that have some sort of challenge, because medium sized and large Canadian firms with great balance sheets, profits, and solid cash flows can access great credit terms from the banks.

Unfortunately that isn’t the client profile we're talking to everyday - as owners we meet have challenges such as inability to secure the operating cash they need, the requirement to acquire additional assets, or even a full acquisition of a competitor. And that economic turbulence we mentioned earlier usually means that many firms are coming out of a turnaround type environment and are slowly getting their financials back in order. Therefore the ability to secure an ABL facility (abl = asset based lending) for inventory and receivables becomes the goal in asset financing.

So what is the real difference in asset financing under and abl facility compared to a bank line of credit, commonly called a ' revolver ' in business finance. The best way we explain it to clients is that the bank focus is on cash flow, the asset based lender focuses on assets. Big difference!

So, does your firm qualify for abl financing? In general, as we stated, any firm with assets of receivables, inventory, equipment and real estate qualifies. Where the challenge comes in is deterring the overall quality of those assets as well as the size of the facility. An ABL facility is generally available for any firm with over 250k in a combination of receivables, inventory, and equipment. In certain cases even tax credit receivables can be financed.

Where you as a business owner have to focus is the choice of a partner in this type of financing. If your facility requirements are in the millions of dollars and you have high quality business assets (i.e. collectible receivables, inventory that turns) you can access significantly more credit than under a normal bank facility - at rates commensurate with bank financing.

Small firms pay a premium for this type of facility, but when you consider you can access almost all the business credit you need under such a line of credit, coupled with the ability to grow profits and revenues and take on additional orders... well , we'll let you decide if that’s worth a premium .

If you want to comfortably walk the business financing minefield in ABL and feel you aren't 100% conversant with the players, requirements, and pricing then consider seeking a trusted, credible and experienced Canadian business financing advisor in this area .

P.S. If you found your access to business credit has just doubled, don’t say we didn’t tell you!






7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 '

ABOUT THE AUTHOR
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

Asset Financing - Does Your Firm Have What It Takes For An ABL Facility With An Asset Based Lender?

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Information on a business line of credit known as an ABL facility via an asset based lender. This type of asset financing can double your access to business credit and working capital

You're on the hunt, and the prey is business financing under an asset financing scenario you have heard so much about. Let's examine what an ABL facility is, who is the asset based lender that offers this financing, and, oh yes, do you qualify?

To say that business credit financing is top of mind these days with Canadian business owners and financial managers is clearly an understatement. With the economic clouds clearing on the horizon after the 2008-2009 business credit meltdown business owners are looking for growth financing.

And the reality is that the type of operating facilities that you are looking for are getting tougher to secure from Canada's major chartered banks. We are of course referring in general to firms that have some sort of challenge, because medium sized and large Canadian firms with great balance sheets, profits, and solid cash flows can access great credit terms from the banks.

Unfortunately that isn't the client profile we're talking to everyday - as owners we meet have challenges such as inability to secure the operating cash they need, the requirement to acquire additional assets, or even a full acquisition of a competitor. And that economic turbulence we mentioned earlier usually means that many firms are coming out of a turnaround type environment and are slowly getting their financials back in order. Therefore the ability to secure an ABL facility (abl = asset based lending) for inventory and receivables becomes the goal in asset financing.

So what is the real difference in asset financing under and abl facility compared to a bank line of credit, commonly called a ' revolver ' in business finance. The best way we explain it to clients is that the bank focus is on cash flow, the asset based lender focuses on assets. Big difference!

So, does your firm qualify for abl financing? In general, as we stated, any firm with assets of receivables, inventory, equipment and real estate qualifies. Where the challenge comes in is deterring the overall quality of those assets as well as the size of the facility. An ABL facility is generally available for any firm with over 250k in a combination of receivables, inventory, and equipment. In certain cases even tax credit receivables can be financed.

Where you as a business owner have to focus is the choice of a partner in this type of financing. If your facility requirements are in the millions of dollars and you have high quality business assets (i.e. collectible receivables, inventory that turns) you can access significantly more credit than under a normal bank facility - at rates commensurate with bank financing.

Small firms pay a premium for this type of facility, but when you consider you can access almost all the business credit you need under such a line of credit, coupled with the ability to grow profits and revenues and take on additional orders... well, we'll let you decide if that's worth a premium.

If you want to comfortably walk the business financing minefield in ABL and feel you aren't 100% conversant with the players, requirements, and pricing then consider seeking a trusted, credible and experienced Canadian business financing advisor in this area.

P.S. If you found your access to business credit has just doubled, don't say we didn't tell you!



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 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.



7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
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






Article Source: http://EzineArticles.com/5989784

Business Credit Line Needs : Understanding The ABL Loan Facility Solution

Business Credit Line Needs : Understanding The ABL Loan Facility Solution


OVERVIEW – Information on the ABL facility loan in Canada . This business credit line alternative is becoming more popular . Here is why including benefits and potential drawbacks because .. business is a balancing act

Business credit line needs in Canada sometimes require a ' gear change '

when things arent working enough, or... at all. One solution and alternative is the ABL facility loan, somewhat unknown or misunderstood by many business owners and financial managers in Canada. Let's dig in.

Asset based lenders are somewhat of the ' new frontier' for satisfying borrowing needs for Canadian business owners and financial managers. While traditionally at a higher cost than bank borrowing the good news is that in almost all cases these credit lines have rates that are becoming more attractive , if for the only reason that Canadian chartered banks realize that business borrowers have more and more alternative solutions available.

Is there a ' simple ' way to understand the Asset based business line of credit? We think there is, and it's simply to understand the ' collateral' focus is ' Assets ‘. They most often are: Receivables, Inventory, Equipment... and occasionally real estate. From the bank perspective the main qualifiers for a credit line are: Cash flow / clean balance sheets/profits. Those arent always permanently achievable as most owners/mgrs realize.

As far as the uses of an ABL facility go they include daily operational financing, growing a business. Two other uses are commonly buying another business or simply a consolidation of debt... if that makes sense.
More often than not it’s not a permanent facility, as many clients for whatever reason deem Canadian banks as their preferred lender.

Is size important? We suppose it depends but smaller facilities typically start in the 250k range, and as far as upper borrowing limit there essentially is none. Typically a ' due diligence' type fee is associated with such a loan / credit line that is based on size, risk, uniqueness of the industry, etc.

One of the strong appeals of the Asset based business credit line is that borrowing margins are more attractive. Typical ranges are 90% for receivables and anywhere from 30-70% on inventory. Firms with an investment in fixed assets can borrow on a revolving basis on the liquidation value of equipment/fixed assets.

True asset based loans tend to be ' non covenant ' in nature and don’t come with the ratio and covenants associated with a bank credit line. If there is one downside to the ABL facility it’s that reporting on your business is more rigorous - that must be balanced against borrowing power and access to capital.

If your company wants to ' change gears ' on the type of revolving credit facility that might make more sense seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can help you understand one of the ' new frontiers' in business finance in Canada.



Stan Prokop - 7 Park Avenue Financial :

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 90 Million $ of financing for Canadian corporations . Info /Contact :

http://www.7parkavenuefinancial.com/business-credit-line-abl-loan-facility.html







Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?
CONTACT:
7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop