In the pure sense and most relevant meaning of the term in Canadian asset finance the ABL facility provides a comprehensive asset financing or monetizing of current (and in some cases) fixed assets which allow a company to significantly enhance their working capital facilities. This type of facility competes head on with Canadian charted bank facilities.
The asset finance lenders in Canada have recently gained significant traction. We feel the primary reason is simply that their facilities offered enhanced borrowing with a focus on assets, unlike comparable chartered bank facilities which come with a stringent requirement of clean balance sheets, profitability, ability to maintain rations and covenants, and in many cases requiring outside collateral.
The 2008 and 2009 global recession enhanced the viability and visibility around ABL loans. Banks all over North America pulled back on commercial lines of credit and revolver finance - leaving thousands of companies with reduced, restricted, and in some cases no borrowing or operating facilities.
Most Canadian business owners and financial managers are simply not aware of who the ABL asset finance lender is. Typically they are smaller boutique firms, often subsidiaries of major U.S. corporations and banks. Their teams are small, highly focused on one thing (monetizing assets for cash flow and working capital!) and offer facilities anywhere from 250k to hundreds of millions of dollars.
Many Canadian companies are also not aware that several of the Canadian charted banks have created asset finance lenders within their bank, and the ultimate irony is that when a loan is called by a chartered bank a competing division within the bank can often rescue the company. We'll let you mull that one over!
As we noted facilities are available for any amount over 250k but the pure play ABL revolver typically comes in at 3 to 5 Million dollars as an entry point. Rates are often competitive to Canadian banks, and small firms can pay a significant premium in financing charges, the offset being able to access working capital to facilitate growth and profits.
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