Business Financing in Canada. We’ve always felt that an ABL lender (ABL = ‘ Asset Based Lending) is one way for the Canadian business owner and financial manager to get the house… i.e. your company, in order!
Larger corporations, in Canada we often refer to them to as the FP 100, or FP 500 perhaps have access to capital in a number of ways. And if they are public companies relying on equity, all the better of course.
Unfortunately if your firm is in the other hundreds of thousands group you’re a victim of the changing tides of access to capital in Canada. Think back to 2008 when it could not have gotten worse. The hurdles to that access to business financing seem… high!
In Canada there is a whole spectrum of business financing available. It’s a question of knowing where its available, and how you can access it. Thats where the ABL lender comes in – they fulfill on of those huge niches in Canadian finance… Asset Financing.
The challenge quite often is simply understanding the terminology, and the finance folks in the industry do a great job, probably (we hope!) unintentional of confusing us with various terms in Canadian business finance.
We have found there is a solid roadmap business owners/managers can use to successful complete asset based business financing. So lets share some of the steps on that roadmap.
Many clients we talk to need business financing… yesterday. And that many times is the problem in that they are perceived as somewhat desperate and in dire straits, creating potential negative perceptions around their ability to raise, and repay financing.
Knowing how you will use asset based lending is simply a case of ensuring that your ABL lender understands a clear use of funds. More often than not its cash flow and working capital financing… ie your daily operational needs.
In many cases certain types of finance are simply not suitable for your firm. You can waste a lot of time chasing financing that will never happen, and weve met our share of clients doing just that.
The ABL lender has one goal, and when it works you will be in great shape. That goal is to leverage assets. That of course has to be balance with an appropriate return to the lender, as well as your companys’ ability to generate a positive return on this new capital.
The true beauty of asset based business financing in Canada is that it covers the gamut of business stages: start up and pre revenue, emerging growth, growth, and mature.
The asset based line of credit works great in certain cases – its optimal when it finances receivables, purchases inventory, etc. It doesnt work when it is used inappropriately for term debt, fixed asset purchases, or product development needs.
The ABL lender is typically non regulated, they are private firms that compete with banks and finance assets they are comfortable with. Receivables and inventories and equipment are great ABL assets. These deals have no amortizations, grow with your firm, and are ‘ evergreen in nature.
Can ABL get your business financing house in order? It has for hundreds / thousands of firms, so consider speaking to a Canadian business financing advisor who can assist you with finance success.