We meet a lot of business owners that say they don’t necessarily feel ‘ in charge ‘ when it comes to business asset finance and their ability to secure a proper revolving line of credit.
ABL credit, i.e. the asset based line of credit via a non bank facility is one way the Canadian business owner can take charge and regain control o their business financing needs .
Asset based lenders exist in a wide variety of forms in Canada… today we’re focusing on the true asset based lender that provides, outside the bank environment, business lines of credit .
Where it gets a little confusing for Canadian business is that some day to day terms are intermingled to make this form of finance confusing to some. Trust us, its not confusing!
Hopefully even we can be forgiven for contributing to some of that confusion sometimes, as we have positioned ABL Credit as a non bank solution. But in reality even some of the banks participate in this type of finance via separate boutique divisions within the chartered banks. It’s at that time its important to know who to deal with and why.
True asset based lines of credit revolve around one thing, the ultimate liquidation of collateral. Simply speaking the security and liquidity in the business asset finance LOC focuses on the underlying collateral that you’re borrowing against. As we have noted in the past that collateral consists of receivables, inventory and equipment for the most part. (Real estate can also be added in sometimes.)
So whats different about ABL credit when it comes to a comparison to a Canadian chartered bank? The simple explanation is that in a bank line of credit your ratios and covenants have to be performing, as set out and agreed to by the bank and yourself, with a revolving ABL facility you need to ensure those assets are operating, ie turning over, and hopefully growing.
That’s probably our most significant point today, that being that your assets secured under the ABL facility must have a solid liquidation and market value. In revolving business asset finance you typically borrow 90% of A/R, and 30-70%, as negotiated for inventory and equipment.
The appeal of Asset based lines of credit is that it pertains, in Canada, to all sizes of firms. While larger facilities tend to be in the millions of dollars a financing program of this manner can be set up for a minimum of 250k if in fact your firm is smaller. But we repeat… essentially there is no upper limit.
Want to regain control and take charge of your business financing. Speak to a trusted, credible and experienced Canadian business financing advisor on how revolving business asset finance can help your firm.