So, can you ignore asset financing and let other firms, including your competitors use ABL as their new choice of operating financing? Of course you can, but if this type of loan or facility (it's not a loan per se) has the ability to virtually guarantee you access to financing for all future growth we think it's remiss of you not to consider it. That's just our humble opinion.
The bottom line is that this type of asset based line of credit financing facility is almost always tailored to your specific needs. It provides you with the flexibility to have a customized arrangement around the borrowing power you can generate via... guess what, Assets!
And what are those assets? Commonly they are receivables, inventories, and in some cases as an add on, fixed assets or real estate. It's simply the monetization of those assets based on realistic values (often achieved by an appraisal)that gives you al alternative , and by the way, almost always larger ! operating facility .
If as a Canadian business owner or financial manager you're concerned about the future of financing for your firm and you have special needs or situations then ABL is probably the answer to your alternative, which is losing out on growth opportunities or having to look elsewhere for debt or outside equity.
We mention debt because you do have alternatives to ABL lending such as cash flow term loans, sub debt, etc but surely the ability to monetize assets to the maximum and not borrow relative to the balance sheet is appealing?
We've referenced the ability of your firm to secure the future of your financing and growth via an ABL lending and financing facility. Clients who want to make this drastic change to non bank financing always ask a question that could generally be summarized as ' whats in it for us '. The answer is pretty simple, increase cash flow for firms that have assets, both current and fixed, that aren't being monetized now. Although you might end up reporting more on the monthly values of those assets most clients are happy to know that these reports are no longer tied to covenants and ratios, etc as required by traditional Canadian chartered bank financing. Issues of seasonality in your working capital, or being flexible to take advantage of new opportunities (including acquisitions by the way) make ABL lending a solid ' loan ' financing facility alternative choice.
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