Untangling Biz Financing Via ABL Capital – Overcome Business Line Of Credit Finance Hurdles!

Is ABL capital a solid or maybe your ‘best choice’ when it comes to untangling the challenges your business faces when it comes to a comprehensive business line of credit? We think it’s a solid finance solution and many industry experts agree. Here is why!

What is ABL? …. which of course stands for asset based lending. We ask that question only because it, and other terms such as ‘ cash flow ‘ mean different things to different people. In our terms it is a total solution business line of credit that allows you to borrow against your receivables, inventory, equipment, and even real estate, all within one revolving facility. It is as simple as that.

It’s really a total solution that , in effect, is an ‘ evolution ‘ in the concept of a business line of credit. For the asset based lending company, your new partner in business banking its all about the balance sheet. That is of course compared to Canadian commercial business banking, where it’s all about the balance sheet… and your cash flow statement, and your income statement… and your personal guarantees. Those of course are what drive Canadian business banking rates to be so low and so great… if you can access them!

If we had to line up the different companies that access ABL capital its a diverse group – its larger firms that are very bankable but can access more capital at better rates , all the way down to start ups with a more limited financial history, at the same time having assets that can be financed .

We are pretty sure this doesnt exist in Canada, we certainly haven’t seen it yet, but in the U.S. there is a huge ABL capital market known as ‘ Second Lien ‘. Under these facilities the asset based lender sits on top of the senior bank facility, in 2nd position, and advances even more against the total assets already being financed by the bank. Surely that is one reason why our banking and lending practices are much more conservative in the world marketplace – we don’t lend twice against the same asset!!

When we sit down and talk with clients about what can be financed and how its often practical to finance current asset accounts such as a/r and inventory via an ABL line of credit, while at the same time financing the equipment and other fixed assets under a separate facility with a finance partner/lender who has an appetite for those type of assets. That total combination of two facilities gives our client a lower ‘ blended cost ‘ of funds and at the same time increases borrowing power – talk about a ‘ double whammy ‘!

What made asset based finance popular in Canada when it comes to business owners and financial managers seeking solid biz credit facilities? A lot of it revolves around 2008/2009 when financial markets went awry and thousands of Canadian businesses started to investigate alternative methods of financing their business. And ABL sure was one of them.

And the irony in the above? Simply that companies that even theoretically qualified for more traditional financing could not get it… enter the ABL facility!

So is there a trend emerging in Canadian business lines of credit. We think there is. In the U.S. experts confirmed that in 2011 asset based credit lines almost doubled. Did that happen in Canada? We think it did, perhaps somewhat less so, but clearly the emergence of a new trend.

If your company is looking to grow (or just survive) investigate the benefits of ABL capital , making you a more effective competitor . Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in making the right decision with the right type of facility.

Stan Prokop – founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 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.
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