By sprokop
We hear the term a lot these days. A ‘ talking point ‘ is simply a ‘ succinct statement designed to be persuasive ‘. Let’s examine some key talking points on commercial financing in Canada, very specifically the ABL business credit line. (ABL is the acronym for asset based lending).
Part of our job seems to always be simply defining ‘ ABL ‘ in our context, because it’s often a catch all term or various single asset finance categories, for example receivable financing.
Instead we’re talking about what is referred to as a ‘ comprehensive ‘business credit line, one that lends against a combo of inventory, receivables, equipment. Although low interest rates are what often attracts clients to a more traditional Canadian chartered bank line the reality is that thousands of firms simply can’t access traditional bank credit.
Although the Canadian economy has somewhat slowed down financing needs are as large as ever, whether you’re a start up, an early stage company, or a mid market or larger corporation.
In the U.S. this form of financing is very developed, in Canada it’s been a different story with various players, mostly non bank, not regulated firms have come and gone, and returned back to the Canadian space to deliver this commercial financing product.
‘Are there times when the ABL business credit line is a perfect solution for business finance”? is a typical client question. Probably the most common time for your firm to consider it is when you are in a restructuring phase. This is when the power of this business financing truly emerges because at a time when you company needs it most and can’t qualify at the bank ABL business credit typically increases the funding to your firm.
The caveat tot that last statement is simply that you need to have the ‘ assets’ on which that increased lending is based – That’s the ‘ A’ in asset based financing!
It’s at this point that we always find ourselves explaining the differences in this financing relative to traditional bank commercial facilities. Those facilities are much focused, it’s the triumvirate of profitability, cash flow, and a very decent balance sheet; oh and by the way, you require all three!
It’s the flexibility in structure that is most appealing to clients considering this method of finance. All of those ratios, covenants, outside collateral, personal guarantees tend to be either non existent or very minor ‘ talking points’ when it come to an ABL facility. So when you are attempting a ‘ turnaround ‘ the asset based line of credit, simply speaking, is turning with you.
Another great talking point for our proposed new facility is that it can almost always facilitate peaks and bulges in your business; those temporary spikes in working capital needs are sometimes difficult to resolve in a more traditional chartered bank facility.
If there is one final ‘ talking point’ to add it’s simply that the ABL business credit line is probably the best finance method to support sales growth when you are capital structure constrained. So as the Canadian economy improves you aren’t penalized by previous challenges you have undergone.
Speak to a trusted, credible and experienced Canadian business financing advisor on what you need to know about this innovative method of business finance in Canada. Understand the requirements and take advantage of the benefits!
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_business_credit_line_commercial_financing.html
