Why Canadian ABL Finance & Asset Backed Financing Loans & Lending Are An Important Development

Updated: June 02, 2011

Canadian business owners and financial manager know only too well that the focus from a traditional bank perspective is not as much on the assets as it is your overall financial picture, which includes the income statement and your ability to meet ratio's and covenants that are bank designed to protect their lending to your firm. We understand that, and we respect that... it's just that sometimes it doesnt work for our clients.

Your firm could be in various key stages when you consider ABL loans. You could be a start up, you could be enjoying (and suffering) through hyper growth... and you could be fixing historical financial challenges or suffering thru some sort of business crisis or challenge now. That kind of covers the gamut, don't you think. Which is exactly why we offer up ABL lending to clients looking for the 21'st century alternative to a business line of credit.

So how is your overall facility determined? It could not be much more straight forward - you borrow, on a daily basis, against the ' true ' value of your assets -hence the work ' asset' in ABL (asset based lending). Those assets typically are your A/R, your various stages of inventory (raw materials, work in process, finished goods) and fixed assets and real estate if that makes sense for your firm. (Those assets must be owned and unencumbered of course).

ABL lending distinguishes itself from traditional bank financing in that the firms offering this type of financing tend to view themselves as experts in ‘asset ' valuation and liquidation . What does that mean to you? Simply that you have just leveraged up your borrowing capacity significantly.

We remember one client who was a wholesale to the dollar store industry who leveraged a 200k bank line into a 2 Million dollar borrowing facility. How? The asset based lending facility had the expertise there to view the true liquidation value of the inventory. Simple as that. As a challenge call your banker up and ask what the margining base is for dollar store inventory and keep us posted on that answer.

A common question from clients involve the long term viability of this type of financing for your firm .First of all there is the cost issue, and here's where it gets a bit complicated , because ABL loans can be cheaper, the same as, or more expensive than a bank facility . (We're assuming you can get a bank facility!)

Secondly the ABL industry makes no bones about the fact that it is often a bridge solution for a year or two, allowing you to migrate back to what you consider a ' traditional' financing structure. We point out to clients though that ABL is more often than not the ' new traditional '! Historically it was viewed as distressed or alternative funding, that is absolutely not the case these days, with some of the largest corporations in the world utilizing this type of financing in Canada.

Featured Research
  • Budgeting for BI in 2018

    Is your business ready for Business Intelligence (BI) software? As BI software continues to improve, more businesses are moving to adopt BI sooner rather than later. Before you make that commitment though, it pays to figure out exactly how much money it will cost you to implement. more

  • Gartner Report: Gartner Magic Quadrant for Contact Center Infrastructure, Worldw...

    The 2017 Magic Quadrant provides Gartner’s annual analysis of the contact center infrastructure vendors. The report examines the innovations driving the market and compares vendors based on completeness of vision and ability to execute. more

  • Forrester Report: Artificial Intelligence with the Human Touch

    Artificial intelligence (AI) can’t replicate the human touch, but it can ease your agents’ burden by handling many simple, repetitive requests. A new Forrester Consulting paper offers a look at the strengths and weaknesses of both AI and humans independently, yet how blending them together can give your customers the seamless end-to-end experience they expect. more

  • eBook: Not All Cloud Contact Center Platforms Are Created Equal

    Everyone says they’re “in the cloud,” but most technology leaders would agree that not all clouds are created equal. When evaluating a cloud contact center solution for your business, it’s important to understand the difference between a true Cloud 2.0 application and traditional software, including which features to look for and why those features are important. more

  • eBook: Contact Center Economics and the Cloud

    If you are considering the right deployment model for your contact center, economic guidelines can help you choose the solution that is best for your company. Cloud, on-premises or hybrid. more