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Asset Based Lines of Credit – Canada

Guest post by: Stan Prokop

Article Overview: The article highlights the growth in popularity of asset based lines of credit, commonly known as ABL financing in Canada and reasons for its growth .

Asset Based Lines of Credit – Canada

Asset based lines of credit - Canada is catching on quickly to a new breed of financing facility that has been in existence in the U.S. for a number of years. Whether your firm is relatively new, large or small, you have the option of looking at an based line of credit']);"> asset based line of credit as an alternative financing facility in Canada.

Due to the uniqueness of this financing we strongly recommend that you work with a trusted and experienced business financing in this area of Canada finance.

Part of the reason that based lending']);"> asset based lending - more commonly called ' ABL ' has caught on in Canada is the current state of commercial business banking and in Canada and the access to liquidity challenges that many firms face in the 2010 business environment .

When your company has significant assets tied up in accounts receivable, inventory equipment, and sometimes real estate you want to ensure you are financing them at optimal levels for both survival and growth.

Although the basic financing concept is new ABL has been prospering in the U.S. for a number of years - Canadian firms compete with U.S. ABL lenders in our own business financing marketplace

As we noted some of the largest corporations in Canada utilize this type of financing, but the demand for ABL probably grew more out of the need for smaller and medium sized firms in Canada - lets say with revenues under 50 Million dollars - to get the operating financing they need .

The benefits of Asset based lending seem very obvious to Canadian business owners and financial managers. The financing revolves totally around assets, and places only a very small reliance on debt to equity ratios, operating ratios, cash flow coverage, etc. When Canadian businesses cannot satisfy their bankers on the above ratios and loan cash flow coverage they view ABL as an alternative financing solution. We would point out that ABL financing, similar to any other commercial financing, is not a solution to a firm who is in a death spiral - years ago ABL had the taint of a 'lender of last resort '- that is categorically not the case now, and is utilized by firms who want to maximize operating and working capital financing but cant in many cases satisfy all Canadian chartered bank requirements.

The typical scenarios under which a firm considers an based lending']);"> asset based lending arrangement are:

Growing very quickly - in high growth mode

Expanding into new markets

Merging with another firm

In 'Special Loans 'now and wishes alternate financing

We can't over emphasis the before mentioned point about financial statement characteristics - based lines of credit']);"> Asset based lines of credit focus solely on assets, that is where the liquidity and the operating facility works at its best . In many cases firms which have previous financing arrangements can significantly increase their credit availability by switching to an ABL line of credit. Our firm worked with a firm who was in Special loans with a chartered bank, they had an original line of credit of 750,000.00 - the bank cut it down to 500,000.00 and also put the customer into Special loans category. We originated an based line of credit']);"> asset based line of credit for 1,000,000.00 based on the firm's receivables, inventory, equipment and real estate. The customer utilized the ABL for about 18 months and then migrated back to commercial chartered banking arrangements with another bank. That story plays out over and over again in Canada.

Asset based lines of credit - investigate this unique financing option and work with a business advisor']);"> trusted business advisor if the solutions meet your working capital needs.

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Article Tags: abl, asset based financing Canada, working capital financing



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