Without Business Credit Lines Or An ABL Line Is Your Company Failure Rigged : Commercial Credit 101

Are Business Credit Lines The ‘ Secret Sauce ‘ Of Growth For Your Company

OVERVIEW – Information on business credit lines in Canada . Bank commercial credit facilities or an ABL line play an important role in the growth and financial success of any business – here is how .. and why






Business Credit Lines in Canada are often the ' secret sauce ' that helps propel a company to financial success. Whether it’s a non bank commercial credit ' ABL ' line, or a Canadian chartered bank line of credit it's a fact that financing your working capital properly is often the differentiator in success or failure. It's one of the ' Secret Sauces ' in business success. Let's dig in.

As your business invests more funds in the products and or services that you deliver the need for commercial credit financing of some type increases. The very simple reason for that is the fact that your customers don't pay you the same day you deliver products or services, and quite often the gap in even getting to your invoice stage is significant.

Revolving credit facilities in Canada can be broadly grouped into two areas: bank lines of credit and non bank commercial asset based lines of credit. (In truth there are some subsets of Asset based lines of credit - they might include A/R finance only, inventory finance, leveraging equipment assets, or combinations thereof!)

Your ability to finance your current assets properly will deliver solid cash flow as your company grows. The gap between different industries is significant. We can only envy the internet retailer who gets paid before they even deliver product! Conversely a firm in another industry might take on a project that takes a month or two to deliver on, and another month or two, or more !.. to get paid. That’s the working capital challenge.

Knowing the value and the timing of your assets is key to financing business credit lines. Once the business owner/financial manager have a handle on the working capital cycle of a company the solution becomes a lot more achievable.

Having access to business credit for cash flow allows you to constantly stay ahead- its better to be planning growth than reacting to cash flow shortages in your operations. Simple very basic trends can be determined by having regular monthly financials and charting your trends in A/R, inventory, sales, etc.

Term lenders that you might have in your business (term loans, equipment leases, etc) want to rely on the fact that your cash flow from operations can retire your monthly obligations.

It should be pointed out also that if your business is ' capital intensive ‘for fixed assets, etc you simply require more access to commercial credit business lines.

Bank or ABL lines will finance on an ongoing basis the value of your A/R and inventory. In the case of ABL your fixed assets are also thrown into the mix, allowing you to borrow on a revolving basis against the value of those assets, together with inventory and receivables.

While bank pricing is lower and more flexible companies that are growing quickly and can’t access ' traditional ' financing should consider Asset based lines of credit.

If you are looking for the ' secret sauce' deliverable in a business credit line seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in achieving working capital and cash flow success.




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 :

7 Park Avenue Financial = Canadian Business Credit Line Financing Expertise





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

Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

Business Credit Line ? ABL Revolving Credit Facilities Turn Bank Lines On It’s Side

Attended Business Credit Line School Yet ? Here’s Your Agenda !

OVERVIEW – Information on bank credit facilities in Canada . The ABL revolving line of credit is one alternative to working capital financing for Canadian businesses . Here’s why and how !





Bank credit facilities ? Have you been to business credit line school yet? After talking to clients about their financing challenges it's safe to say they are hoping to attend, and one of those reasons is the revolving ABL line.

Did you know there's an alternative to the commercial bank business line of credit? It is known by various terms, the simpler being the ABL, or asset based line. An old mentor of ours advises that ‘ tuition is very high in the school of experience ‘, so let’s share some key facts and knowledge in this critical area of business finance in Canada.

This borrowing facility, non bank in nature is a solid alternative to those flexible and low cost commercial lines of credit offered by our Canadian banks. The two major differences - they are more expensive but easier to get. In many cases borrowing power can be increased anywhere from 50-100%.

Clients we talk to always focus on the basics - they are ok with an initial explanation to get them started on a business borrowing facility that in most cases they have never even heard of . So the short explanation is that the non bank ABL lender focuses on your assets in the business, versus your cash flow coverage and equity ratios that are of prime importance to lenders in the banking system.

The main similarity in Canadian bank and ABL lines of credit is that they are typically secured by receivables and inventory. The asset based credit revolver often also adds in fixed assets which are treated in a manner similar to A/R and inventories - ie you can borrow against them on an ongoing basis.

Both banks and the ABL lender use standard borrowing base information to determine how much you can borrow at any given time. It's really a function of your balance sheet assets at the end of the month. Very typical ABL advances are 90% on receivables, and anywhere from 30-70% on inventories. Borrowing for working capital for liquidity on equipment, under the ABL scenario, requires an agreed upon valuation of the assets in question.

We forgive the business client looking to understand ABL for always trying to figure out how their normal day to day banking fits in. The simple answer? It's that you keep you regular bank account set up - funds are deposited as you need them under ABL borrowing. Receipts are placed into a separate account that is created at the bank for your business - this account with your receipts offsets your borrowing.


Remember also that neither bank borrowing or monetizing assets via ABL credit lines add debt to your balance sheet. Your firm is simply cash flowing current assets. It is critical to focus on the fact that both bank and ABL lending simply provide you with a quicker access to cash. We can say the Abl facility, as opposed to the bank has no real upside limit - as you grow sales and assets such as A/R your business line of credit grows with you. Banks by their nature and history and practice tend to run these facilities on set limits with annual reviews.

Pricing on bank and ABL lines is always a key topic of focus for the Canadian borrower. While the majority of asset based lines of credit are more expensive it’s important to remember that you use this liquidity from ABL to grow. You are no longer banking your clients - you're using your receivables to achieve a higher return on investment via better asset turnover. And at the risk of being too obvious you are not always going to be approved for the amount you require under a commercial Canadian chartered bank facility - your odds of approval, for liquidity needs, are much better in an asset based line of credit.

Has the ABL credit line turned traditional bank borrowing on its side? There's certainly a case to be made for that. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in differentiating the difference and benefits of various business credit line options.



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 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :

7 PARK AVENUE FINANCIAL – BANK CREDIT AND ABL FACILITIES




7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com















Stan Prokop