Business Credit Lines Are A 4 Lane Highway : Which Lane Are You In ?
OVERVIEW – Information on business choices within the need for a business revolving credit line . What types of financing work best are what are some of the cost and operating issues in bank and non bank corporate credit facilities
Business revolving credit line needs are a necessity for almost all Canadian businesses in the SME Commercial sectors of the economy. But did you know that this type of credit / borrowing facility is actually a 4 lane highway. The challenge? Which lane are you in? Let's dig in.
Why does business prefer revolving facilities? It's probably because they have maximum borrowing flexibility and it's established once up front.
Your business might not need a line of credit if you're one of the lucky ones that actually have ' negative working capital ‘, which is in effect a cash type business where you collect monies before you pay suppliers, etc . Examples might be an internet retailer or certain retailers. But that's the rarity of course and the category your company probably does not fall into.
So, as we asked, if biz credit lines are a 4 lane highway, which lane are you in?!
One of those lanes is a traditional Canadian chartered bank line of credit. It's in effect an open ended credit facility which your business draws on as needed. Given today’s low rates its maximum flexibility at lowest cost - if you qualify! (Miscellaneous fees typically apply) .Security for bank credit lines is typically an all encompassing security agreement (‘GSA’) and guarantees of the others. Potentially outside collateral is also required, as well as the potential requirement to maintain certain minimum account balances. Typical bank advances for receivables are 75% of your accounts that are less than 90 days old.
Let's not also forget that banks and other commercial lenders typically will ask you to maintain certain financial ratios and covenants when it comes to your balance sheet or cash flow. Failure to meet those makes you ' off side'!
A 2nd type of revolving credit line is a more basic solution. It's A/R financing on its own, often called ' Factoring' but coming with many additional ' flavors ‘. In many forms of factoring you will be required to have your clients notified of the whole process - with client payments going to the lender. To avoid this somewhat ' undesirable ' process we recommend a better solution to clients: CONFIDENTIAL RECEIVABLE FINANCING. This form of ' factoring' allows you to bill and collect your own receivables with no notification to others. Canadian business owners no doubt love this type of control.
Key benefits of A/R financing inlcude the fact that no credit limit is set on your business - it fluctuates with your sales revenue. Typically higher costs come with this type of financing, but the benefits are significant - unlimited cash flow potential to grow your business.
A 3rd lane on our business credit line highway is the 'ABL ' Asset based business line of credit. This facility, offered by both banks and more notably commercial finance firms allows you to borrow under one facility based on the total ongoing value of your A/R, Inventory and Fixed Assets. Borrowing advances are therefore much more generous, and it’s very common to double your borrowing power under ABL facilities as compared to a bank fixed credit limit.
Our 4TH lane on the business credit line highway includes your ability to access numerous miscellaneous single solutions to working capital borrowing - they inlcude inventory finance ( suited to retailers /distributors ) , tax credit financing for SR&ED claims, PO Financing, and Royalty finance .
Which lane on our business credit line highway does your firm belong in? Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your cash flow finance needs.
7 Park Avenue Financial :
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 . Info /Contact :
7 PARK AVENUE FINANCIAL = CANADIAN REVOLVING BUSINESS CREDIT LINE EXPERTISE
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 '
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
