What are the benefits in using ABL?
- Fewer Covenants – Less reliant on borrowers operating performance requiring fewer financial covenants.
- Higher Lending Tolerance – Asset based lenders have collateral to secure its loans and may be more willing to work with a borrower during financial difficulties.
- Limit Interest Expenses – Allows for pay down and re-borrowing of funds when needed. You only pay interest on our outstanding loan balance.
- Liquidity – Asset rich borrowers can leverage more liquidity than typical lending permits.
- Motivation to Collect Accounts Receivables– Rates is based on current eligible accounts receivables, motivating borrowers to collect on their accounts receivables quicker.
- No Excessive Reporting – Asset based lenders require minimal reports. Usually just a monthly aging of accounts receivables and inventory is required. Reporting is tailored to each individual loan.
- Versatility – Provides immediate on-going cash flow that can be used to purchase materials and supplies, meet operating expenses and payroll, meet seasonal demands and to keep payables current.
What are the uses of ABL?
- Buyouts – The purchase of a controlling percentage of a company’s stock. In a leveraged buyout, the acquiring company uses the minimum amount of equity to purchase a targeted company. The target company’s assets are used as collateral for debt, and its cash flow is used to retire debt accrued by the buyer to acquire the company. A management buyout is a leverage buyout led by the existing management of a company.
- Capital Expenditures – Capital expenditure is the money spent to acquire and/or upgrade buildings and machinery. Capital expenditure is also commonly referred to as capital spending or capital expense.
- Debtor-in-Possession Financing – Refers to a company that has filed for protection under Chapter XI of the Federal Bankruptcy Code and has been permitted by the bankruptcy court to continue its operations to implement a formal reorganization. The company can still obtain loans, but only with bankruptcy court approval. GMA Inc. also provides financing to companies coming out of bankruptcy.
- Dividend Recapitalizations – The process of fundamentally revising a company’s capital structure. This is achieved by taking on a material amount of debt; the company increases its ongoing interest obligation but is able to pay its shareholders a special dividend.
- Growth – As a company grows so does its need for financing. As a company’s collateral grows, its assets can strengthen its ability to borrow. GMA Inc. can assemble a credit facility that can scale to grow with a company.
- Leveraged Employee Stock Ownership Plan – Allows a company to raise its capital-to-asset ratio by issuing new shares of stock to an employee trust, which finances the transaction with an asset-based loan. The loan is repaid in pre-tax corporate dollars, and dividend payments to employees as well as the dividends reducing the loan are tax-deductible expenses. This type of plan may provide new capital for expansion or capital improvements divest a division, make acquisitions, to buy out the stock of a retiring owner, and buy back publicly traded stock.
- Merger & Acquisition – To grow a business; a company may look to acquire a strategic partner or even a competitor. Asset-based financing is often an efficient means to obtain funding for business acquisitions.
- Refinancing/Restructuring/Debt Consolidation – When a company enters or exits a growth stage; refinancing or restructured financing may be key to creating a capital structure that better meets the needs of the company. This type of financing is often used for market expansion, completing an acquisition, restructuring operations, or following a successful corporate turnaround.
- Turnarounds – Is often used by under-performing businesses that are not achieving their full potential. Asset based financing is ideal for turnarounds because of its flexibility.
- Working Capital – The assets available to apply to a business’ operations are considered working capital assets. At times, working capital loans are needed to bridge financial gaps during the lifecycle of a business. Working capital loans can be secured by a variety of asset types, including accounts receivable, inventory, equipment, and/or real estate.
GMA Inc. will work hard for you to get you set up in as little as 3 business days. Get started immediately by filling out the quick application on the right-hand side of this page or go to our online or downloadable application.