Optimistic as us? We would bet a nickel that you’re a lot more optimistic about business growth and prospects heading into 2011 – Could it have gotten any more challenging over the last two years? Doubtful !
So how asset could based lending Canada and a working capital loan facility give you all the business financing optimism you might have lost over the last couple years.
Simply for the reason that, when properly utilized and structured an asset based line of credit, aka an ‘ ABL ‘ is in our opinion your best bet for a one stop shopping solution for all your cash flow needs.
That’s a pretty powerful statement, so let’s examine what an ABL solution is, how it works, and more importantly, why you should potentially consider it for your business financing and working capital solutions.
Simply speaking asset based lending is a cure all for firms that are highly leveraged, have had some challenges in financial performance, and at the same time have an asset base to move forward on and grow the business .
The term asset based line of credit is in no way misleading – it’s simply a line of credit that finances your assets (receivables, inventory, and potentially equipment and real estate) on a revolving basis. To put it in better context think bank line of credit without the rations, covenants, additional collateral, emphasis on personal guarantees and personal net worth, etc.
An ABL working capital loan or revolving facility simply gives you the tool to grow your business, and that tool is cash. No longer will you have to worry about negotiating seasonal or one time bulge needs in your finance needs, and you could even consider an ABL facility as a solution to acquire a competitor.
In many cases the asset based lending Canada solution that you need is a stop gap against two key challenges, the ability to grow your business when you don’t have enough owner equity and are potentially over leveraged.
Naturally the alternative solution to a working capital facility such as this is for the owners of the company to put in more equity and long term working capital. That typically has a lot of challenges to it, and if you talk to anyone seasoned in business finance you’ll quickly learn that giving up equity is a lot more expensive than monetizing your assets, which is what a working capital loan facility does when you consider the ABL solution .
So how does the facility work – it is a non bank solution with an independent firm, and provides you with 90% receivable financing, and inventory borrowing that’s based on the actual value of your inventory, not some pre determine cap or limit that many banks impose. (That’s because banks generally don’t have the ability to understand your inventory values – ABL lenders do!).
Asset based lending, in our experience is a bit more costly than traditional banking, but the upside is you have unlimited cash flow financing for your growth and unique business challenges. One other perceived disadvantage of asset based lending in Canada is simply that you have to report on your a/r and inventory in a more timely fashion – Quite frankly though we often tell clients that type of reporting will help them understand their business better .
So, you’re probably intrigued! As we have shown you a solution to expand, meet cash flow needs, and access working capital cash flow that might otherwise not be available. Speak to a credible, experienced and trusted Canadian business financing expert on how to access a working capital loan and operating facility today – It’s your 2011 best bet for business financing.