It’s possible, and we’ve seen it work all the time. How could one type of business financing, i.e. asset based lending, be the only business credit tool our firm will ever need?
Typically when we meet with clients to talk about non-bank alternatives to cash flow and working capital challenges we speak in terms of many type of financing being complimentary to each other – example : factoring and purchase order financing . In most cases one type of Canadian business financing is not necessarily going to do the entire job you need – Except..! Except when it’s an Asset based lending solution for business credit.
‘ABL’ is sort of the new kid on the block – it’s vastly popular in the U.S. and gradually taking off in Canada, some say in fits and starts, which is partially due to the entry and departure of various firms that dominate the market.
ABL, which is our acronym for the solution can be tailored very specifically to be the total one stop financing solution your firm needs. The two greatest dynamics of ABL is that it offers your business more credit availability (isn’t that what it’s all about) and at the same time can be customized to your industry and specifically, your company!
In its purest form is simply putting in a customize loan facility to allow you to draw daily against the value of your receivables, inventory, and in many cases fixed assets and real estate. It’s kind of the business version of a home equity line of credit we like to explain to clients!
But wait a minute, clients say, isn’t it exactly what a bank does. Well, yes, and absolutely no! Conceptually it is still the same, but the asset based lending business credit facility focuses solely on the assets, so you will rarely , if every hear terms such as rations, covenants, outside collateral, personal guarantees, etc in the context of an ABL solution .
So is it the right financing tool for your firm – we’ll let you be the judge of that. But if your firm required a working capital and cash flow revolver in excess of 250k and you have some financial challenges you are immediately a candidate. Oh and by the way, you absolutely need to have receivables, inventory and fixed assets to get this type of facility, that’s really the main premise.
Typical candidates we work with all the time have margin pressures, they don’t have the business financing in place to support sales growth and new orders, , or they have some real business and balance sheet issues revolving around restructuring, turning around, coming off a bad year, receiving a mega contract, etc .. If that sounds like you we can assure you that you’re a candidate for asset based lending business credit.
Key benefits of the facility are greater cash flow, no covenants or ratio maintenance, and the ability to take advantage of opportunities otherwise not available.
So is it the be all and end all financing solution. Only you as a Canadian business owner and financial manager can decide – so speak to a trusted credible and experienced business financing advisor to see if this type of business credit is for your firm.