Can ABL Asset Based Line Of Credit Lending Cure Your Finance Blues

Is there anything worse in business than the Finance Blues? We don’t think so, and one potential cure is asset based line of credit lending in Canada.

The reason this method of business financing is still somewhat widely unheard of, (or worse yet) misunderstood comes down to that fact that a majority of busines owners in Canada, we think, don’t understand they have options. And ABL lines of credit are clearly a new option.

It kind of always comes down to two different cures for the business finance blues, one is when your business simply can’t achieve traditional financing within our chartered banking system, and the other is when the amount of financing the business owner and financial manager needs far exceeds what other forms of finance can’t deliver on.

And when ABL turns out to be both flexible , and justifiable in cost , that’s where the cure has kicked in !

Are there any typical scenarios under which asset based lines of credit work best, or are more common? One that we see often is that your company has come out of the 2008-2009 recession with a lot of focus having been around simply managing your business and assets to the best of your ability without the use of or access to bank type financing. Things are better, sales are growing again and fortunately or unfortunately that means that receivable and inventories… you guess it, are up!

We won’t weigh in today on why traditional methods of financing might not be working any more…. at the end of the day your firm has deemed to be unfinanceable or, as challenging, financeable without the amount of capital you need access to!

That latter point is a common one, your firm has financing now, but always seems to be out of cash. And in many cases a simple glitch on either an operating covenant or some interim financial losses challenges your bank or other institution to reduce their involvement in your firm… just at a time when you are looking to increase that involvement.

That is the ABL asset based credit line solution then – a simple focus on your operating and fixed assets that allow you to margin those to great cash flow and liquidity that you never thought you could access previously. To re enforce our point … it’s not about the balance sheet and income statement, it’s about the ‘ A’ in Asset based lending, your ‘ Assets’!

Typical advances on an ABL facility include a 90% receivable advance and a predetermined amount of your inventory on an ongoing basis, anywhere from 25-75%.

Is traditional bank type lending on the rise again? We’re not sure, supposedly it is, but who really knows. What we do know is that asset based credit lines are absolutely on the rise – they are your cure to the working capital blues!

Summary

So whether you consider ABL as a transitional finance vehicle, or simply a new great solution for business financing take time to investigate this method of finance in Canada. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in curing those finance blues!