Heard About The Revolution? How ABL Lending Revolutionized Canadian Business Line Of Credit Financing

We checked… a revolution is a ‘ complete or marked change in something’. So why do we maintain that ABL lending, i.e. asset based non bank lines of credit are, of all thing revolutionary? Here’s why.

When Canadian business owners or financial managers are exploring new business lines of credit they are in one of small number of situations – those include ; financial distress, acquisition finance, growth, start up, etc.

Any one of the above situations has is a challenge – lets look at one that can be realistically position as a ‘ larger challenge ‘… aka THE TURNAROUND.

Is there anyone more challenging for a business to change the financial course and direction? We personally doubt it (although makings sales is sometimes as tough!). Many business owners and financial controllers associated credit risk with the pricing of their financing. That’s a reasonable assumption. So logically banks, who only offer great pricing, are… you guessed it… some risk averse to financing a turnaround. Even we agree with that… and by the way… did we mention we love Canadian banks.

But if that’s the case… how can a legitimate turnaround be financed? Good question? We’ve got an answer – an asset based line of credit, via ABL lending in Canada.

The reason an asset based business line of credit works when a traditional alternative doesn’t is two fold – you have business collateral and assets and the fact that a true asset based lender prices risk, quite somewhat unlike our chartered banks.

Typical situations in a turnaround are quite logical – financial losses, being put into ‘Special Loans’ or your firm is perhaps ‘ off covenant ‘. Off covenant is of course when certain ‘ number relationships’ in your financials don’t make sense. In many cases we see clients are also in debt to CRA, those good folks at ‘ the government ‘.

The asset based lender is often the solution that both you, and your bank! are looking for. This financing attempts to fix the problem that you and the bank cannot. The good news is that often your firms reputation and expertise are of course worth saving.

Typically your ability to prove that you can still generate sales growth is a key element to an ABL lending turnaround situation. When that can be validated a finance offer typically includes high margining of receivables and inventory, with those funds often being used to restructure some debt, clear CRA arrears, all the while leaving some working capital for growth .

Often times an appraisal of any fixed assets is required… however this ultimately benefits the customer by adding in an additional borrowing base that now becomes a part of the overall credit facility.

And besides growing those sales and operating efficiently again, what are your responsibilities under this type of business line of credit financing. It all comes down to proper and timely reporting of sales, receivable collections, and inventory and fixed asset lists.

So, is a business financing turnaround achievable in Canada? It absolutely is, and one of the ways that can happen is via ABL lending, a revolutionary concept in Canadian Biz finance. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in formulating a financing turnaround, with a business line of credit that makes sense to your current needs.