Downside Of Canadian ABL Asset Based Finance ? P.S. There Is No Downside! Business Financing And Lending That Works

Asset Based Lending Works



Information on ABL asset based finance. Explaining the perceived downside of lending via asset base lines of credit financing for Canadian firms.





So, which is it? We're big proponents of ABL asset based finance in Canada. So once in awhile a client pops the question. What's the question? It's ' Is there any downside to asset based financing for a Canadian firm?" Fair enough. ABL lending seems to have only good things attached to it in terms of the benefits. So about that downside...

We often hear the term perception versus reality. In the mind of the perceiver the perception is of course reality.

The world of ABL financing in Canada is in some ways fairly new. It's used by wholesalers, distributors, retailers, and manufacturers as an alternative to the commonly known ' bank operating line of credit '. One guesses that to be able to ' pan ' something and express concerns about the downside that you have to know what you're talking about.

In simple terms ABL lending in the context we're talking about it is a revolving line of credit secured by the assets of your company. Those assets are most commonly A/R, inventories, and in some cases we can throw unencumbered fixed assets and real estate into the mix. Again, simply speaking you borrow on a daily basis against the total value of all those assets once the asset value is agreed upon between yourself and the ABL lender.

So, on to that perceived downside! Many business owners and financial managers make the assumption that their firm must have the same credit quality that Canadian chartered banks require - that being profits, clean balance sheets, owner guarantees, the necessity for outside collateral on occasion, etc.

So the perception is that the downside here is that approval for ABL asset based finance is challenging. That clearly is not the case, if your firm has assets that can be financed you are in fact the best candidate for asset based lending.

Pricing. That clearly is perceived by many clients as the downside to this newer method of financing Canadian business. So, again, perception, or reality?! The reality is as follows: larger asset based lines of credit; particularly those in excess of 3 Million dollars are priced ultra competitively with Canadian banks. In some cases they might be lower!

How's that for a perception breaker?! For facilities between 250k and the, say 3 Million range pricing is done based on credit quality. In general these facilities are in fact priced higher, but in fact become the only alternative for firms that can't access any form of traditional financing at all.

‘Our company is public ' says a CFO. So we assume we can't access ABL revolver facilities?' Nothing can be further from the truth, as our ABL financing solution serves both private and publicly controlled companies, either on the TSX or Venture exchange in Canada. Even subsidiaries of U.S. companies by the way could qualify for asset based lines of credit. And in fact we think shareholders of public companies would like the idea that asset based facilities tend to grow and provide ongoing capital as the firm grows.

Fees. That’s the other common complaint we occasionally here about asset based finance. Here's where we will give in a little bit to those naysayers, as yes, there are some miscellaneous fees associated with ABL lending. But those fees only are a bit larger when we're talking about those very large revolving facilities, and in that case the pricing and access to more credit and working capital tend to offset any cost such as an appraisal fee, commitment fee, etc.

Finally, time to get approved and closed. Clients perceive ABL financing, perhaps because it’s different, as taking long to close. If you have solid reporting, can talk intelligently about your business and are prepared to commit to a new lending relationship we don't think there is any more time involved versus a bank line of credit.

So, perceptions. Realities. You decide, but be open to accessing this new method of financing. Speak to a trusted credible and experienced Canadian business financing advisor for assistance in your reality check!







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 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.


Info re: Canadian business financing & contact details :


http://www.7parkavenuefinancial.com/abl_asset_based_finance_lending_financing.html

Canadian Asset Based Finance Has All The Best Ingredients For A Business Line Of Credit – Business Receivables Financing

A winning strategy for business lines of credit in Canada


Information on asset based finance facilities in Canada – Why ABL working capital facilities are a solid line of credit solution for business receivables, inventory and equipment finance.



Asset based finance is a solid working capital solution for a business line of credit as an alternative to bank financing. An ABL (asset based lending) line of credit provides an operating line of credit facility for a combination of both receivables and inventory. This can be achieved in Canada via a traditional receivable financing facility for firms that have both domestic and out of country receivables.

Often times this type of facility provides cash flow when your company is growing, or perhaps wants to acquire another firm... even a competitor. If we had to label many clients that are searching for the right asset based finance facility we would quite frankly put them in the category of being in a turnaround or restructuring situation.

Proceeds from this facility can be viewed in many positive ways, one of which is to simply give you leverage and negotiating power with suppliers for pricing and discounts ... and why? Because you now have cash flow that allows you to buy smarter, purchase larger quantities of materials - all of which are on top of your new found ability to feel more comfortable about day to day financial burdens such as payables, salaries/wages , etc.

Many Canadian companies that approached asset based finance solutions have often exhausted traditional financial solutions. We stress to clients that asset based finance solutions are the last thing from ' lending of last resort '. In fact they in some cases can be more cost effective, and almost 99% of the time, in our experience, provides clients with more liquidity and access to capital.

And don’t forget also that when you approach asset based finance from a business receivables or inventory financing point of view you are no longer forced to consider scenarios such as raising additional equity and diluting ownership .. and that’s a good thing if you're a business owner in Canada.

So how exactly do asset based finance solutions provide that much more liquidity, than say... a traditional Canadian chartered bank line of credit. They do that by margining you receivables at higher levels, or margin rates that banks, and also include additional borrowing on that same facility based on inventory, equipment and real estate, all of which are rolled into one day today borrowing facility.

In order to qualify for this type of financing it becomes a question of controls and reporting. Your firm should be in a position to report on an on going basis on aged receivables, payables, inventory counts, etc. It's that level of business control that will get your firm the highest asset based finance facility.

Look at business receivables financing via an ABL facility as a type of financing that becomes the bridge for your firm to either move to a Canadian chartered bank facility or a true tier one ABL facility with comparable bank rates and structures.

When you are not aware of all the possibilities available to your firm for a business line of credit option speak to a trusted, credible and experienced Canadian business financing advisor who can help you reach the higher ground in asset based financing in Canada.



7 PARK AVENUE FINANCIAL

Canadian Business Financing

http://www.7parkavenuefinancial.com/asset_based_finance_business_receivables_credit.html