‘Confidence in good sense ‘ – that’s one definition of the word trusted. And we think that’s a great way of thinking about ABL financing and asset finance in Canada. So ABL… What is it? It stands for asset based lending, and the simple definition of this new Canadian business financing facility is simply as follows.
ABL is a revolving line of credit facility whereby your assets are secured by the facility you borrow against all those assets on a daily basis.
But, and its a big but, as opposed to bank financing via a Canadian chartered bank facility you are allowed to borrow against the real world maximum liquidity of those assets . Typical assets secured under an ABL financing facility are receivables, inventory, fixed assets, and on occasion real estate if that also fits into your asset equation.
The uniqueness of Asset based lending is simply that the majority of these facilities are offered by what we call ‘ non – banks – given that that majority of Canadian business owners and financial managers associated ‘ borrowing’ and lines of credit with Canadian chartered banks. Instead , the ABL community tend to be independent finance firms, some of whom are U.S. based but doing business here , who focus and have tremendous expertise in the one thing you cherish most – your business assets !
So where does the versatility com from then? That’s the great part of a line of credit via asset finance strategy. It’s all about what we call ‘ maximization ‘ (is that really a word?). In ABL financing usually 90% of receivables become an immediate borrowing base, and inventory tends to be financed in the 30 -70% range. In case you haven’t figured it out yet (we’re sure you have) that’s about 30-70% more than you probably were getting before. And, under the concept of true asset finance, the appraised value of your unencumbered fixed assets also now become part of your daily borrowing ability for cash flow and working capital as you need it . Tell us that isn’t versatility!
Because ABL financing increases your ability to borrow for liquidity purposes it allows you to put aside the challenges of meeting qualifications for chartered bank lines of credit – all those things your banker loved to talk about – leverage, cash flow coverage, minimum debt to equity ratios and on it goes… you know the drill.
So, is your firm eligible? It is if you meet the sole criteria – you have assets! The beauty of asset finance is that it works for small firms, major corporations, firms that have financial challenges, and those enjoying the best of all worlds, high growth and profits and a need for constant new working capital.
So, got what it takes? If you have the need, for increased, flexible and higher lines of borrowing power then speak to a trusted, credible and experienced Canadian business financing advisor who will ensure you have a facility that meets your firms unique survival, growth, and financing needs.