One of our favorite expressions these days is that the old ways don't work anymore. As it relates to today's subject we're talking of course about commercial banking facilities in Canada, and focusing primarily on firms that have challenges to raise working capital and cash flow facilities that work.
It often comes down to a comparison of the two types of financing, traditional Canadian commercial banking, and our favorite new kid on the block, ABL lending and banking. We use the term new but quite honestly it's simply a Canadian business financing facility that hasn't been heard of by many Canadian business owners and financial managers for a variety of reasons. Maybe some people prefer to hide a good thing and keep it secret.
So whats better, a ' regular ' commercial banking facility via a Canadian chartered bank, or ABL lending and financing via a true asset based line of credit? Regular commercial facilities are extremely focused on criteria for mutual success - we say mutual because we hope everyone agrees your firm and the lender both have to win. (By the way, we are on our clients side! in that battle)
Got what it takes for a Canadian commercial banking facility - you know the drill - you need reasonable leverage, no significant events that are negative in nature, covenants that are a combo of income statement and balance sheet based, - example: fixed charge coverage, etc!
But hey, what about ABL banking and asset financing - whats required there. . Are you ready? Just assets!
That's the appeal of asset based banking and financing - it focuses almost solely on current assets, key categories being of course receivables and inventory. Where our commercial banking friends focus in a dramatically different manner in analyzing and funding your business the ABL focus is simply n asset monitoring, and ensuring you can borrow on a daily basis at the highest of advance rates based on real world values of your assets. Oh, and by the way ' strange events ' are fully allowed - so you have a challenge, an acquisition, a special loan situation, a year of bad luck .. You will still be forgiven by abl lending and banking.
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