Asset Based Business Credit Line : Fast Working Capital for Canadian Businesses

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YOUR COMPANY IS LOOKING FOR A  CANADIAN ASSET BASED LINE OF

CREDIT AND WORKING CAPITAL FACILITY! 

Unveil the Secret: How Asset-Based Lending Transforms Canadian Businesses!

UPDATED 06/24/2025

You've arrived at the right address! Welcome to 7 Park Avenue Financial 

        Financing & Cash flow are the biggest issues facing businesses today

                              ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS FINANCING OPTIONS?

CONTACT US 

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

WORKING CAPITAL FINANCE VIA ASSET-BASED LOANS

Unlocking Growth Potential: A Deep Dive into Canada's Asset-Based Credit Line Solutions 

INTRODUCTION  

Are you looking to give your Canadian business a boost in working capital?

You might have heard of asset-based credit line solutions—for some, an unknown concept that has now become the go-to answer for many businesses.

Let's unpack this financial tool and show you how asset based lending offers sales and revenue growth with access to more capital!

It's a real problem. On one hand, business owners and financial managers seem more optimistic about their future success and competitive edge.

But here's the kicker: all that optimism must be weighed against the practicalities of financing day-to-day operations and future growth based on the current creditworthiness of the business.

Cash Flow Crisis? Your Assets Hold the Solution

Every Canadian business owner knows the frustration—promising contracts in hand to expand operations and grow sales, but lacking immediate cash to fulfill them.

Traditional banks say "no" or demand impossible guarantees for their unsecured loans. Meanwhile, your valuable inventory and receivables sit idle while opportunities disappear.

Let the 7 Park Avenue Financial team show you how An asset based business line of credit transforms your existing assets into immediate working capital, letting you act fast when business demands it most.

THE CHANGING LANDSCAPE OF CANADIAN BUSINESS FINANCING

Remember the good old days when financial options were aplenty?

At 7 Park Avenue Financial, we don't either. The asset-based credit line was once this obscure, misunderstood entity. But guess what? Times have changed, and it's time we understand what this financing entails.

A NEW SOURCE OF CAPITAL FOR WORKING CAPITAL AND CASH FLOW

We all know the struggle: working capital, cash flow, and managing capital expenditures while preserving business credit.

If you're a small or medium-sized business in Canada, it's like playing financial chess without the queens. You're constantly strategizing but with limited pieces.

Canadian banks talk a good game but leave many smaller businesses hanging for a loan or line of credit based on current financial standing and issues around growing rapidly or securing new customers or a new contract. Sound familiar?

THE ASSET-BASED LINE OF CREDIT WORKING CAPITAL FACILITY SOLUTION

So, what's a business to do when traditional bank loans fall through?

Enter the asset-based line of credit, a.k.a. the ABL facility. It's like this handy toolbox for greater liquidity that doesn't add more debt but magically turns assets and sales revenues into a revolving line of credit.

Unsurprisingly, this innovative solution is gaining traction in Canada's financial landscape as businesses focus on getting a better advance rate on current assets and other assets.

THE WHAT AND HOW OF ASSET-BASED FINANCING REVOLVING CREDIT FACILITIES

Got assets? That's all you need for asset-based lending. It's not rocket science; it's just a practical way of securing cash flow and working capital against what your company already has.

Imagine a bucket that's filled depending on what you put into it—your accounts receivable, inventory, even unencumbered equipment. It's an intelligent way to leverage what you have without overcomplicating things.

ASSET-BASED LENDING IS FLEXIBLE

Why choose ABL? It's not just about higher advance rates or the ability to finance various assets. It's also about the freedom and control it offers. Imagine driving on a road with fewer restrictions and more open lanes.

Even Canadian banks are getting on board with ABL solutions, though some critics argue they still cling to traditional banking models.

THE FOCUS IS ON BUSINESS ASSETS AS COLLATERAL

ABL is like a spotlight that focuses solely on the collateral. It's simple, direct, and depends on your sales and business assets. Since this is relatively new terrain, grabbing a guide is wise—let the 7 Park Avenue Financial team be your north star in navigating this unique aspect of Canadian business financing.

MAXIMIZING ASSETS AND SALES REVENUES

Here's a metaphor to chew on: ABL is like squeezing the juice out of an orange—you're getting every last drop of value out of your assets. Whether it's receivables, inventory, or unencumbered equipment, the strategy is leveraging these to the fullest.

Even Bob Dylan's famous lyrics might resonate with the evolving image of ABL lending: "The times they are a-changin'!"

7 KEY TAKEAWAYS

1. Asset-Based Lending (ABL) uses collateral value and liquidity of working capital assets as primary credit considerations for lines of credit.

   • Focuses on short-term asset liquidity, not long-term stability.

2. Originally a financing source of last resort but now used by thousands of private and public companies!

   • ABL has evolved as an attractive option for well-performing companies.

   • Dominated by independent lenders 20 years ago, now mainly controlled by banks.

3. Lower cost of bank capital passed on to borrowers via competitive rates

   • ABL credit spreads are comparable to middle-market bank loans due to surplus liquidity in the markets.

4. Typical commercial lending focuses on operating earnings and equity balances.

   • ABL is concerned with converting assets to cash and potential impairments to that conversion.

   • Relies on liquidated collateral for repayment, regardless of business state.

5. Advances credit against the most liquid business assets like inventory and accounts receivable under 90 days old

   • Self-liquidating through the continuous turnover of the cash cycle as companies sell on credit and collect unpaid invoices.

   • Credit expands with sales growth; excess cash flow reduces the credit line.

6. No set amortization schedule.

   • Robust monitoring of asset turnover.

   • Confidence in collateral value.

   • The capture of collateral proceeds in control accounts or lockboxes.

7. Near real-time understanding of the borrower and loan state—ABL facilities increase almost automatically.

   • Allows risk metering by adjusting advances if the borrower stumbles.

   • Credit availability is formula-driven, often customized to specific assets and situations, mainly against accounts receivable and inventory.

Case Study

The Manufacturing Turnaround

A Canadian manufacturer faced a crisis when their largest customer delayed payments by 90 days, creating a $500,000 cash flow gap. Traditional banks declined their loan application due to the payment delay affecting their financial ratios.

7 Park Avenue Financial originated  an asset based financing solution -  that advanced 80% against their accounts receivable and 50% against finished goods inventory. This provided $650,000 in immediate working capital.

The result? The company fulfilled pending orders, negotiated early payment discounts with suppliers, and maintained their workforce. Six months later, with improved cash flow management, they qualified for traditional bank financing at better rates while keeping their asset based line available for future opportunities. 

The key benefit: Asset based financing provided bridge capital that preserved the business during a temporary setback, ultimately strengthening their long-term financial position.

CONCLUSION - THE POWER OF ASSET-BASED FINANCING TO UNLOCK BUSINESS POTENTIAL

Could ABL be the missing puzzle piece for your Canadian business? Why not explore and take advantage of the cash flow and working capital that can propel your growth? 

So, are you ready to step into the future of financing? Your growth path might be just an asset-based loan away!

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor for business credit line solutions.

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION

What is asset-based lending? How ABL works

Asset-based lending facilities are a type of business loan where the credit considerations are based on the value and liquidity of assets. Asset-based lending is a business loan focusing on working capital assets' collateral value and liquidity.

ABL credit via asset-based funding is more concerned with asset liquidity and factors that may impair the conversion.

The ABL lender differs from normal commercial banking/lending because it relies on the asset being able to be converted into cash rather than the business's long-term stability.

Understanding asset-based lending ensures the borrower understands how a borrowing base is determined based on a business's ongoing sales and asset values, providing constant credit availability. Liquid assets such as A/R and inventory have higher values based on loan-to-value calculations.

Loans based on assets via ABL lenders are considered less risky, so the maximum loan will be considerably more than the assets' book value/face value. Interest rates charged vary widely, depending on the applicant's credit history, cash flow, and length of time doing business.

How does asset-based lending differ from traditional loans?

Unlike traditional loans, ABL doesn't add debt to the balance sheet, and the overall business credit rating and credit quality are less important than business assets as eligible collateral. It's a revolving facility that monetizes assets, offering greater flexibility and often faster access to funds. Flexibile  Equipment financing can be easily accessed separately for asset acquisitions.

Traditional loans often come with more rigid terms and covenants around creditworthiness, while ABL focuses mainly on the value of the collateral.

Can small and medium-sized businesses benefit from asset-based lending in Canada?

Absolutely! ABL appeals to small and medium-sized businesses that may have difficulty securing traditional bank loans. By leveraging existing assets, these businesses can access vital working capital to fuel growth, manage operations, and navigate financial challenges.

Are there any special requirements for securing an asset-based line of credit?

The main requirement from asset-based lenders is for a company to have tangible assets that can be used as collateral. These might include accounts receivable, inventory, unencumbered equipment, and sometimes physical assets such as commercial real estate. The quality and liquidity of these assets, along with the overall risk profile of the business, will typically determine eligibility and terms.

What makes asset-based lending an attractive alternative to other financing methods?

The asset-based lender offers an asset-based credit line working capital facility with higher typical advance rates compared to banks and other types of loans, flexible terms, and often a quicker approval process.

Its "covenant-light structure" and minor emphasis on personal guarantees make it appealing to many business owners. Additionally, ABL can accommodate a broader range of financial situations based on a company's assets, making it a versatile tool for various business needs and growth stages to help better manage cash flow and bring more significant capital into the business.

Citations

1. Canadian Federation of Independent Business. "Business Credit Access Report 2024." CFIB Publications. https://www.cfib-fcei.ca
2. Bank of Canada. "Credit Conditions Survey: Business Lending Trends." Bank of Canada Reports. https://www.bankofcanada.ca
3. Commercial Finance Association. "Asset-Based Lending Market Report." CFA Industry Studies. https://www.cfa.com
4. Statistics Canada. "Small Business Financing in Canada." Government of Canada Business Statistics. https://www.statcan.gc.ca
5. Secured Finance Network. "Canadian Asset Based Lending Guidelines." SFNet Publications. https://www.sfnet.com
6. 7 Park Avenue Financial."Unlock Your Company's Potential with Flexible Credit Line Solutions" . https://www.7parkavenuefinancial.com/business-credit-line-financing-asset-based-lending.html