What is an ABL loan, i.e. an asset revolving line of credit a candidate for a position in the business Book of ‘ Awesome ‘? We think so. Here’s why.A business debt restructuring loan. ABL financing (asset based lending) offers a strong solution for firms who require some restructuring. Why does this type of financing suit the immediate needs of the business owner or equity investors? Simply because it takes a different look at all the assets of the remaining business, including inventory, receivables, and fixed assets.
By focusing on the assets of the business this typically provides significantly more breathing room for the business as it settles into a new stage of its life. The ability to leverage these assets provides more liquidity at rates commensurate with the current overall credit risk.
While a bank solution for such situations might significantly emphasize cash flow, the ABL facility takes the posture that assets are the key collateral. This focus allows asset based lending to supersede a more traditional banking solution which often time simply is not available due to the businesses current state.
The other benefit of an ABL business debt restructuring loan facility is simply that it’s available to the SME sector of the market. Larger or public corporations requiring restructuring tend to have access to business credit that only large capitalization corporate firms can access. Companies in that, for example, 1-50 Million dollar ranges can view an ABL solution as their solution to restructuring.
Firms in restructuring mode quite often are focusing on getting back to breakeven and profitability. The ABL solution is simply more patient in allowing them to do that. Since other models of financing and business loans focus on cash flow/EBITDA etc. the asset based finance solution allows a firm with declining or lower cash flows to leverage the asset base for liquidity.
And by the way, although we refer to this financial restructuring vehicle as a loan in effect it’s a monetization of assets, so there is no ‘ pay down ‘ per se. ABL restructuring solutions are often paid out by a chartered bank when it comes to returning to profitability and growth and a stable balance sheet.
The challenges for the business owners and the financial manager is significant when it comes to restructuring. It’s all about cost structure, sales revenue, efficiencies, asset sales… or upgrades, and people issues. These challenges, safe to say, need time and an ABL financing solution can give your firm that time.
Are there some solid takeaways when it comes to looking at your restructuring finance needs? We think there are, and they include the fact that this type of solution needs time to take hold, sales volume takes awhile to regain stride, and the business owners and manager who are managing through the current situation need to be able to measure progress,
Speak to a trusted, credible and experienced business financing advisor who can assist you in relieving the burden of a financial restructure scenario via an asset based ABL facility. It’s a solid working capital and business survival tool that will provide significant improvements to your cash flow growth.