How In Fact Can an ABL Asset Based line of credit facility have you feeling UN – mathematically eliminated in Canadian Business financing? Let’s explain.
The other day we heard on the radio that a local hockey team was in fact ‘ mathematically eliminated ‘ from the playoffs. What is meant of course was that no matter how well they did for the balance of the season they in fact couldnt make their final numbers and success better.
In our opinion thats how many Canadian business owners and financial managers feel about their ability to access the maximum amount of business line of credit they need – simply speaking they’re constantly being told that the numbers don’t add up and they are coming short with their working capital and cash flow needs.
Does that have to be the case? We don’t think so and thats why we propose an asset based business line of credit facility, termed an ‘ ABL ‘ to give your company that feeling of not being eliminated!
Let’s recap what the ABL is. It’s really a loan or monetization in the form of a business line of credit. It focuses on one thing and one thing only, your assets! Typically its the current assets on your balance sheet, i.e. receivables and inventory, but it can very easily make fixed assets and real estate a part of that same business credit facility.
The amount you can draw on for daily cash flow operating needs becomes a function of your growth in assets. We think you can see what is happening here – as your sales grow your cash flow draw down ability grows, in lock step! You in effect, using our theme today, can’t be eliminated!
Once your ABL facility is in place you’re in a position to constantly draw down on those agreed upon percentages. Typically the ABL allows you to draw 90% of A/R and anywhere from 30-70% of inventory. The astute business owner or finance manager can quickly see that the amount of liquidity that they immediately can access is significantly larger than they are receiving anywhere else, including their chartered bank.
As your company grows every owner/manager, whether you are in a start up or established firm realizes you have to have a handle of access to cash flow… Cash flow isnt ‘ accrual accounting; its the result of your asset conversion.
The Asset based line of credit facility allows you to avoid mistakes and it outperforms pretty well every other type of business line of credit. Speak to a trusted, credible and experienced Canadian business financing advisor on how you can keep in pace with your operating and growth needs.