YOUR COMPANY IS LOOKING FOR BUSINESS CREDIT VIA AN ABL LOAN!
IS ASSET BASED LENDING YOUR KEY TO BUSINESS SUCCESS
UPDATED 05/20/2025
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Financing & Cash flow are the biggest issues facing business today
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
"Access to capital is one of the biggest constraints facing businesses today." - Karen Mills
ABL LOANS - A FLEXIBLE FINANCING SOLUTION FOR YOUR BUSINESS
Business credit in Canada. Can ABL loan facilities financing really provide you with that' wind in your sails ' your company needs to generate ongoing working capital and cash flow needs?
We think so, and here's why! Let's dig in on the asset-based loan solution!
When Traditional Financing Falls Short: How ABL Loan Facilities Fill the Gap
Cash flow challenges keeping you up at night? Your valuable business assets could be the key to unlocking the financing you need.
ABL loan facilities offer a flexible financing solution that focuses on what your business already owns rather than solely on credit history or future projections.
Let the 7 Park Avenue Financial team show you that when traditional lenders say no, asset-based lending says, "let's see what's possible." !!
WHAT IS ABL LOAN FINANCING?
ABL loan financing is a type of business credit solution under the asset-based lending umbrella.
That allows borrowers to obtain loans and financing using business assets as the sole eligible collateral. Typical collateral in ABL loans includes receivables, equipment, and real estate.
In some cases, brand and intellectual property can also be included as a component of the asset base of the business. Companies in Canada use ABL finance to generate the working capital they need to operate and fund business growth. ABL loans are typically structured in a more flexible format than traditional bank loans.
These days, as we’ve noted recently, there isn’t a day when we don’t hear about the challenges of companies ' tumbling when it comes to their challenges in finding working capital and even long-term financing. (Today, we're talking about working capital/ cash flow)
However, the good news about the revolving door is that when ' the bank says no ' or the bank says 'yes, but not that much, there is always an ABL asset-based lender willing to step up to bat.
WHY DO ABL LOANS WORK?
The simple reason asset-based lenders provide the business credit you need is that they are solely focused on the amount, quality, and monitoring of your business's sales and physical assets.
Those assets? They are receivables, inventory, equipment, and in some cases, real estate if that pertains to land or buildings owned by the company.
ACCESSING TRADITIONAL BANK FINANCING IS A CHALLENGE
Our Canadian chartered banks, in their wisdom, focus on cash flow lending, with emphasis on financial statements, ratios, covenants, and outside guarantees.
Who is right? 7 Park Avenue Financial won’t weigh in on that one today; we'll say that each institution, the bank and the ABL lender, is one of two options to finance your business - we'll let you decide which one works best.
While ABL solutions are often more expensive (not always), that’s one reason why companies gravitate to bank financing first.
By the way, asset-based lending firms tend to be non-bank commercial financing companies, although some Canadian chartered banks have entered the ABL market.
ABL LOAN VERSUS TRADITIONAL FINANCING
An ABL loan or operating revolver, as it is termed, offers your firm continuous working capital as long as you have those assets.
The key beauty of this type of borrowing is that it grows with you; it’s not set in stone once a year, as it might be via a bank approval.
Who uses ABL? Pretty well, every type of firm in Canada includes manufacturers, service firms, retailers, and high technology firms. Again, pretty well, everybody!
The size of these facilities determines who you deal with and your overall pricing and structure. Small deals start in the $500k range, while larger facilities can easily be millions of dollars.
To show you the spectrum, a start-up can have an ABL line of credit, and some of Canada's largest and public corporations have abandoned bank financing in favour of ABL business credit.
THE BENEFIT OF ABL LOANS FOR BUSINESS CASH FLOW
A key benefit of this type of business line of credit tends to be borrowing power - receivables are margined at 90%, inventory ranges from 20-70%, and appraisals and valuations are done on your fixed assets, allowing them to be thrown into the mix.
Just imagine being able to borrow daily against the value of your fixed assets. Asset lending values - That’s ABL power to secure financing in the Canadian ABL marketba!
IS YOUR BUSINESS ELIGIBLE FOR ASSET BASED LENDING? HOW TO APPLY FOR ASSET-BASED LENDING
Your firm's ability to get approved for this type of borrowing will depend on your ability to produce regular and proper financial statements, as well as the need to ensure you can report on current assets on an ongoing basis - i.e. aged receivables, inventory, etc.
Case Study: An ABL Loan Success Story
Challenge: A mid-sized Canadian manufacturer of industrial components was facing a critical cash flow challenge. With rapid growth and increasing orders from major customers, their traditional bank existing operating line couldn't keep pace with their expanding needs. Large customers were extending payment terms to 90 days, while suppliers demanded payment within 30 days, creating a widening cash flow gap that threatened their ability to accept new orders.
Solution: Working with 7 Park Avenue Financial, the company implemented an ABL loan that leveraged their $2.3 million in accounts receivable, $1.8 million in inventory, and $1.2 million in equipment.
This replaced their restrictive $1 million bank line with a flexible $3.5 million ABL facility that grew with their business.
CONCLUSION - FINANCING BUSINESS GROWTH VIA ASSET BASED LENDING
Intrigued? Is asset-based lending right for your business? As a Canadian business borrower, you should be.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with your ABL business credit needs and expertise in executing ABL transactions.
FAQ: FREQUENTLY ASKED QUESTIONS/PEOPLE ALSO ASK /MORE INFORMATION
What is ABL loan financing?
ABL loan financing is a form of business financing that allows businesses to borrow under a loan structure that uses the business's assets as collateral. Key assets normally financed under this structure include accounts receivable, inventories, and fixed assets of the business - in some cases, commercial real estate owned by the business can be included in the facility via either a business line of credit or term loan structure.
Unlike bank financing, very little emphasis is placed on the creditworthiness of the owners of the business. Asset-based lenders are skilled in risk management and asset valuation, allowing their type f financial analysis to provide greater financing for cash flow and business growth. Loan flexibility in ABL finance solutions is the reason this method of alternative financing is becoming more popular in the Canadian business financing landscape.
How does ABL loan financing differ from traditional loans?
ABL loans differ from traditional loan financing via banks or other traditional financial institutions because they are usually more flexible, as the focus is on collateral, versus the emphasis banks place on balance sheet ratios, covenants, personal guarantees, and profit and cash flows.
Since collateral levels fluctuate,e the business has the ability to access more working capital as sales and assets such as the investment in carrying accounts receivables grows. The ability to use a pledged asset to access business funding is a key benefit of asset based lending ABL. Fixed asset facility limits greatly increase the size of a non-bank asset-based line of credit.
What types of businesses are eligible for ABL loan financing?
Businesses of all sizes and industries are eligible for asset-based lending solutions - that includes start-up or early-stage companies and businesses that are temporarily financially challenged or in a restructuring stage - Assets remain the main eligibility focus - many subsets of asset-based loans can be accessed - such forms of financing include receivable factoring, tax credit financing, sale-leasebacks, purchaser order financing, etc. Traditional operating facility advances are often much less than is offered under an ABL borrowing base.
ABL lines of credit and term loans are covenant light structure based, focusing on the liquidation asset values of the company. If a business is in a cyclical or seasonal industry the ability to access capital is important so many types of industries qualify versus conventional lending criteria imposed by banks.
What are the benefits of ABL loan financing?
The benefits of abl loan financing solution include more access to funding that otherwise might not be able to be obtained by a bank or other traditional financial institutions,such as a credit union or an insurance company. Loans are typically structured around the customization of the assets of the business. In many cases, abl loans can help to refinance existing debt. Growth financing funding is one reason why many businesses consider asset backed loans.
What exactly is an ABL facility, and how does it differ from traditional financing?
ABL loan facilities are revolving credit lines secured by your business assets like accounts receivable, inventory, and equipment. Unlike traditional financing that focuses primarily on credit history and future projections, ABL lending evaluates the quality and value of your existing assets. This makes it accessible to businesses with strong assets but perhaps challenging credit histories or limited operating history.
What types of assets can be used as collateral for an ABL loans?
Asset eligibility for ABL loan facilities primarily includes accounts receivable (typically 70-90% advance rate), inventory (typically 50-60% advance rate), and equipment (typically 70-80% of forced liquidation value). Some specialized ABL lenders also consider intellectual property, purchase orders, and even real estate. The key factor is whether the assets have verifiable value and can be reasonably liquidated if necessary.
Who typically qualifies for ABL loan facilities in Canada?
ABL loan facilities are available to businesses across various industries with qualifying assets, regardless of credit history. Manufacturing, wholesale distribution, and service companies with significant accounts receivable often make excellent candidates. The focus is on asset quality rather than perfect credit scores or lengthy operating history, making this financing option accessible to businesses that may struggle with traditional bank requirements.
What documentation is required for an ABL application?
Documentation requirements for ABL loan facilities typically include detailed asset listings (accounts receivable aging reports, inventory listings, equipment appraisals), financial statements for the past 2-3 years, current interim financial statements, and business tax returns. Lenders will also request corporate formation documents and may require personal guarantees from owners. Having these materials organized before approaching lenders can significantly speed up the approval process.
When should a business consider an ABL loan facility instead of traditional financing?
Timing considerations for ABL loan facilities often include rapid growth phases, seasonal cash flow fluctuations, or recovery from temporary financial challenges. This financing option becomes particularly valuable when your business has strong assets but doesn't meet traditional lending criteria due to recent losses, high debt levels, or limited operating history. ABL facilities can also provide breathing room during turnaround situations when conventional financing may be unavailable.
Where can Canadian businesses find reputable ABL loan facility providers?
Provider options for ABL loan facilities in Canada include specialized asset-based lenders, certain chartered banks with ABL divisions, and alternative financing companies. 7 Park Avenue Financial specializes in connecting Canadian businesses with appropriate ABL solutions tailored to their specific industry and size. Working with an experienced broker can help you navigate the landscape of lenders and secure the most favourable terms for your particular situation.
Why might a business choose an ABL loan facility despite potentially higher costs?
Cost-benefit analysis of ABL loan facilities must consider the total value proposition, not just interest rates. While rates may be higher than traditional bank loans, ABL facilities offer greater flexibility, higher advance rates against assets, fewer covenants, and often faster access to capital. For businesses facing opportunities that require quick funding or those working through challenging periods, the ability to access capital quickly can far outweigh marginal cost differences when compared to missed opportunities or growth limitations.
When would an ABL loan facility be inappropriate for a business?
Limitation scenarios for ABL loan facilities include businesses with minimal qualifying assets, those seeking very small credit lines (under $250,000), or companies with highly specialized inventory that's difficult to value. ABL financing also may not be ideal for businesses seeking long-term fixed assets financing, as these facilities are designed primarily for working capital purposes. Understanding these limitations helps businesses determine whether ABL is the right solution for their particular financing needs.
How is the borrowing base calculated in an ABL loan facility?
Borrowing base calculations for ABL loan facilities involve applying advance rates to eligible assets. For example, a business might receive 85% against eligible accounts receivable, 50% against inventory, and 70% against equipment value. These percentages are multiplied by the asset values to determine the total available credit. The borrowing base is typically updated regularly (weekly or monthly) based on current asset levels, making this a dynamic lending solution that grows with your business.
What flexibility advantages do ABL loan facilities offer compared to traditional loans?
Flexibility benefits of ABL loan facilities include minimal financial covenants, credit lines that grow with your business, and the ability to access funds when needed rather than on a fixed schedule. Traditional loans typically come with strict requirements regarding debt service coverage ratios and other financial metrics, while ABL facilities focus primarily on collateral quality. This makes ABL financing particularly valuable for businesses experiencing temporary challenges or rapid growth phases that might cause covenant violations with conventional financing.
How are ABL loan facilities different from factoring?
Factoring for stand alone facility invoices, in comparison with ABL loan facilities shows several important distinctions. While both leverage accounts receivable, factoring typically involves selling individual invoices directly to the factor, who then owns the relationship with your customer. ABL facilities provide a revolving line of credit against your entire eligible receivables portfolio, leaving customer relationships intact. ABL facilities also typically offer higher advance rates, lower costs for larger businesses, and the ability to include additional asset classes like inventory and equipment.
Citations on ABL Loan Facilities
- Commercial Finance Association. (2024). "Asset-Based Lending Market Report." Retrieved from https://www.cfa.com/research/asset-based-lending-market-report
- Deloitte Financial Advisory Services. (2024). "Alternative Finance Trends in Canadian Markets." Retrieved from https://www2.deloitte.com/ca/en/pages/financial-advisory/articles/alternative-finance-trends.html
- Canadian Lenders Association. (2023). "The State of Alternative Lending in Canada." Retrieved from https://www.canadianlenders.org/research/state-of-alternative-lending-2023
- Bank of Canada. (2024). "Financial System Review: Alternative Lending Mechanisms." Retrieved from https://www.bankofcanada.ca/publications/financial-system-review
- PwC Canada. (2023). "Financing the Future: Asset-Based Lending in Canadian Markets." Retrieved from https://www.pwc.com/ca/en/financial-services/publications/financing-the-future-report.html
