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Non-Bank Asset-Based ALTERNATIVES TO GROW YOUR BUSINESS
UPDATED 05/28/2025
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WHAT ARE NON-BANK LENDERS?
Non-bank business lenders, also known as non-banking financial institutions, are organizations, primarily commercial finance companies, that provide financial services and approve loans and credit facilities.
They do not hold a banking license. These lenders offer alternative financing methods /options to traditional banks, often with more flexible criteria and faster funding, but may also have higher interest rates
Asset-based financing via non-bank lenders is one of the most popular and fast-growing business finance options in Canada.
But why are these new paradigm asset loan lenders so popular with increased presence and visibility in all aspects of raising capital, business development, and cash flow today? We think we know exactly why! Let's dig in!
Breaking Free from Banking Barriers
Your business needs funding now, but traditional banks keep rejecting your applications.
Endless paperwork, rigid requirements, and months of waiting are crushing your growth opportunities. Every day without capital means experiencing financial challenges such as missed contracts, delayed expansion, and watching competitors surge ahead.
Let the 7 Park Avenue Financial team show you how Non-bank business lenders eliminate these barriers, providing fast, flexible financing solutions that traditional lenders simply can't match for your business growth needs.
WANT PROOF? ----> We've Got It!
WHAT DOES THE WORLD OF ASSET-BASED FINANCE INCLUDE?
One challenge, though, is that this type of finance term, i.e. ' ABL ' (asset-based lending ), is a bit of a catch-all term when it is first heard by many business owners and financial managers.
There are, in fact, a very distinct number of solutions within the term 'asset based finance ' and asset-based financing companies, including a business line of credit that delivers the same benefits as a bank loan and steps up with capital when you need it the most!
Let's dig in on business asset-based financing basics!
Solutions from asset-based financing companies include :
Asset-based operating lines of credit - The asset-based loan revolver - Businesses pay interest on only funds drawn down in the facility
Factoring / AR finance - Accounts receivable funding/ AR Loans - Asset-based finance factoring solutions include Confidential Receivable Financing
Inventory Loans
Sale-Leasebacks / Asset-based equipment financing
Bridge loans - Custom-tailored asset-based bridge loan solutions
SR&ED Tax Credit loans
Purchase Order Financing
Acquisition/merger financing
Real Estate - asset-backed solutions for company-owned real estate/land
WHY ARE ASSET BASED LENDERS DIFFERENT FROM CANADIAN CHARTERED BANKS
We think you can see the basics, though - it's borrowing power for cash flow and working capital secured by some or all of your business assets.
Unlike Canadian traditional bank solutions, ABL lenders are more often than not commercial finance companies who operate for a profit and, unlike our banks, are not regulated by the government when it comes to asset lending and loans for SME/Small business owners.
That type of regulation often limits borrowing!! Interest rates and cost of financing/asset based financing rates are always higher in ABL lending, but access to more capital is key to business owners.
ABL rates are most commonly perceived as the main disadvantages of asset based financing.
So why consider this type of solution? The most common reason is your firm’s inability to get some of all of the credit from those traditional capital sources.
In some cases, your firm might be in dire straits and is in the process of exiting the bank. (At their request!)
ASSET BASED LENDING VS. TRADITIONAL BANK LENDING
When it comes to understanding how does asset-based lending works, It is very safe to say that non-bank lenders take more risk, provide more capital, and come with a higher cost of borrowing.
For that reason, the ABL loan agreement is not focused so much on loan covenants, balance sheet ratios, owner credit score/credit history, etc.
If your firm is still a startup or early-stage company, you're still often a solid candidate for financing. Hint: Sales revenues also help, as well as your asset-based business loan collateral!
How does one access alternative finance solutions? That sometimes is a challenge in and of itself, as the players are small, large, U.S.-owned, Canadian-owned, and occasionally geographically focused.
All have different rates, structures, solutions, and programs around the asset-based loan facility solution they offer.
In many case,s enlisting the help of a Canadian business financing advisor makes total sense to save time and hone in on the right solution that is comparable to bank lending solutions.
When you do, in fact, focus on the solution that makes sense for your firm, benefits will often include flexibility and quicker access to capital.
In a handful of scenarios, it's not uncommon for an alternative financier to also work within your current bank facility, although that's not the norm.
Industry Statistics
- 78% of small businesses report difficulty accessing traditional bank financing
- Non-bank lenders approve 65% more applications than traditional banks
- Average approval time: 3-7 days (non-bank) vs 45-90 days (traditional banks)
- The Canadian alternative lending market grew 23% annually from 2019 to 2024
- 42% of businesses using non-bank lending report faster growth rates
- Alternative lenders serve 31% of businesses rejected by traditional banks
Case Study: Manufacturing Company Success
Client: Mid-sized automotive parts manufacturer in Ontario
Challenge: Needed $200,000 for new equipment to fulfill the major contract, but the traditional bank required a 6-month approval process
Solution: Non-bank lender provided asset-based financing in 5 days
Results:
- Secured major contract worth $2M annually
- Increased production capacity by 40%
- Hired 12 additional employees
- Established ongoing relationship for future growth financing
Outcome:
What could have been a missed opportunity became a transformative growth catalyst, demonstrating how speed and flexibility create competitive advantages.
CONCLUSION
While traditional banks continue tightening their lending criteria, innovative Canadian businesses are discovering that non-bank business lenders offer not just alternative funding, but superior financing experiences that accelerate growth
Want To Know More About Asset-Based Financing Non-Bank Lenders Finance? The bottom line? There is a whole new ' ball game ' when it comes to commercial business financing asset-based loans via non-bank lenders.
Want to know more about how asset-based lending works versus bank lending, you're looking for lines of credit, cash flow and working capital solutions, or very specialized finance needs?
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with the asset-based financing structure that meets your business finance needs.
FAQ: FREQUENTLY ASKED QUESTIONS
What is asset-based finance?
Asset-based finance is a financing solution that provides businesses with working capital solutions that include term loans and lines of credit. Typical assets that are collateralized by these loans include receivables, inventories, and fixed assets/equipment as well as real estate.
Is it difficult to obtain finance with asset based lending?
When it comes to asset-based lending vs bank financing asset based loans are more easily obtainable than bank traditional loans, as the asset-based lender focuses is on the value of the collateral turnover and asset turnover in categories of receivables and inventories. Less emphasis is placed on bank criteria that typically include balance sheet ratios and covenants, and guarantees.
What is an ABL term loan?
ABL loans are asset backed loans that are structured in the form of a term loan or a revolving line of credit. The majority of ABL lending is in one of those two structures. Term loans are typically on a fixed installment basis, while credit lines revolve based on borrower usage.
Do Canadian Banks Offer asset based loans?
The rise of bank-owned asset-based lenders has grown in Canada. Their solution acts like non-bank lenders and runs specialty financing divisions within the Chartered bank-regulated structure for business financial support, with competitive interest rates. Their product solutions are similar to non-bank lenders and are priced more aggressively due to their ability to access lower-cost of funds. They are different in that the credit quality must be of a higher grade, and deals often start in the 5-10 million dollar range.
What types of businesses qualify for non-bank business lending?
Non-bank business lenders typically work with a diverse range of businesses to secure funding , including startups, established companies with poor credit, seasonal businesses, and industries that traditional banks consider high-risk. A key benefit is that eligibility often focuses on cash flow, business potential, assets, and management experience rather than perfect credit scores.
How quickly can I receive funding from non-bank lenders?
Funding speed varies by lender and loan type, but many non-bank business lenders can provide approval within 24-48 hours and funding within 3-7 business days. This rapid turnaround contrasts sharply with traditional bank timelines of weeks or months.
What interest rates should I expect from non-bank business lenders?
Interest rates from non-bank business lenders typically range from 8% to 35% annually, depending on your business's risk profile, loan amount, and repayment terms. While higher than traditional bank rates, the speed and accessibility often justify the premium for time-sensitive opportunities.
Do non bank lenders require collateral for business loans?
Collateral requirements vary significantly among non bank business lenders. Many offer unsecured loans based on cash flow and business performance, while others may require assets, personal guarantees, or alternative security arrangements depending on loan size and risk assessment.
What documentation do non bank business lenders typically require?
Documentation requirements are generally less extensive than traditional banks, often including recent business bank account statements, financial statements, tax returns, and business registration documents. The specific requirements depend on the lender and loan type. A business plan will always help the case.
Who are the best non bank business lenders in Canada?
The best non bank business lenders in Canada include established alternative lenders, merchant cash advance companies, peer-to-peer lending platforms, and specialized industry lenders who understand your specific business sector's unique challenges and opportunities.
What is the difference between bank and non bank business lending?
Non bank business lending differs from traditional banking through faster approval processes, more flexible qualification criteria, innovative underwriting methods, and often more personalized service, though typically at higher interest rates than conventional bank loans.
When should I consider non bank business lenders over traditional banks?
Consider non bank business lenders when you need quick funding, have been rejected by banks, operate in a high-risk industry, lack traditional collateral, or require flexible repayment terms that accommodate your business's unique cash flow patterns.
Where can I find reputable non bank business lenders?
Reputable non bank business lenders can be found through online lending platforms, financial brokers, industry associations, business networking events, and referrals from other entrepreneurs who have successfully used alternative financing solutions.
Why do non-bank business lenders have higher approval rates?
Non-bank business lenders achieve higher approval rates by using alternative credit assessment methods, focusing on business cash flow rather than personal credit scores, and accepting higher risk levels in exchange for premium pricing structures.
How do non-bank business lenders evaluate loan applications?
Non-bank business lenders evaluate applications using cash flow analysis, business performance metrics, industry trends, management experience, and alternative data sources rather than relying solely on traditional credit scores and collateral values.
Which industries work best with non bank business lenders?
Industries that work well with non bank business lenders include restaurants, retail, construction, healthcare, technology startups, e-commerce, and other sectors that traditional banks often consider too risky or difficult to underwrite.
Can startups get funding from non bank business lenders?
Startups can obtain funding from non bank business lenders, particularly those specializing in early-stage businesses, revenue-based financing, or merchant cash advances that focus on future sales potential rather than established credit history.
How much can I borrow from non bank business lenders?
Borrowing amounts from non bank business lenders typically range from $5,000 to $500,000 or more, depending on your business's revenue, cash flow, and the specific lender's capacity and risk appetite for your industry sector.
What are the repayment terms for non bank business loans?
Repayment terms vary widely among non bank business lenders, ranging from daily or weekly payments over 3-18 months for merchant cash advances to monthly payments over several years for term loans, often with flexibility to match your cash flow cycles.
How do non bank business lenders help businesses grow faster?
Non bank business lenders accelerate growth by providing rapid access to capital for inventory purchases, equipment upgrades, marketing campaigns, and expansion opportunities, allowing businesses to capitalize on time-sensitive opportunities that traditional bank delays would cause them to miss.
What flexibility advantages do non-bank lenders offer over bank / conventional lenders?
Flexibility advantages include customized repayment schedules aligned with seasonal cash flows, ability to modify loan terms as business conditions change, acceptance of alternative collateral, and willingness to work with businesses during temporary financial difficulties.
How do non bank lenders support businesses with poor credit?
Non bank lenders support poor credit businesses by focusing on current cash flow and business performance rather than past credit issues, offering credit rebuilding opportunities through successful repayment, and providing financial mentorship to improve overall business health.
What unique services do non bank business lenders provide?
Unique services often include business consulting, industry-specific expertise, networking opportunities with other clients, flexible application processes, and ongoing relationship management that extends beyond the initial loan transaction.
How do non bank lenders help businesses during economic uncertainty?
During economic uncertainty, non bank lenders provide stability through continued funding availability when banks tighten lending, flexible modification options for existing loans, and alternative financing structures designed to weather economic volatility.
Are non bank business lenders regulated and safe to use?
Non bank business lenders operating in Canada are subject to provincial regulations and consumer protection laws, though oversight varies by province and lender type. Research lenders thoroughly, check references, and understand all terms before committing to any financing agreement.
What happens if I can't repay a non bank business loan?
If repayment becomes difficult, non-bank business lenders typically work with borrowers to modify terms, adjust payment schedules, or restructure loans. However, consequences for default can include damaged credit, asset seizure, or legal action depending on loan terms.
How do I choose between different non bank lending options?
Choose between non bank lending options by comparing total costs, repayment terms, funding speed, lender reputation, additional services offered, and alignment with your specific business needs and cash flow patterns.
Can I use non bank financing alongside traditional bank loans?
You can often use non bank financing alongside traditional bank loans, though some lenders may have restrictions or require disclosure of other debts. Ensure you can manage multiple payment obligations without straining your cash flow.
What should I avoid when working with non bank business lenders?
Avoid lenders with excessive fees, predatory terms, pressure tactics, lack of transparency, poor reviews, or those requesting upfront payments. Always read contracts carefully and consider consulting with a financial advisor or attorney.
What makes non bank business lenders different from traditional financial institutions?
Non bank business lenders differ through specialized focus on alternative financing, innovative technology platforms, streamlined approval processes, and willingness to accept higher-risk borrowers in exchange for premium pricing and personalized service approaches.
How has the non-bank lending industry evolved in recent years?
The non-bank lending industry has evolved through technological advances in underwriting, increased regulatory clarity, expansion of funding sources, and growing acceptance among business owners who recognize the value of speed and flexibility over traditional cost considerations.
What role do non-bank lenders play in the broader business financing ecosystem?
Non-bank lenders fill critical gaps in the business financing ecosystem by serving underbanked markets, providing bridge financing, supporting rapid growth phases, and offering investment capital financing with specialized products that traditional banks cannot or will not provide.
Citations / More Information
- Bank of Canada. (2024). "Small Business Credit Conditions Survey Results." https://www.bankofcanada.ca
- Canadian Federation of Independent Business. (2024). "Alternative Lending Market Analysis." https://www.cfib-fcei.ca
- Innovation, Science and Economic Development Canada. (2024). "Small Business Financing Report." https://www.ic.gc.ca
- Financial Consumer Agency of Canada. (2024). "Alternative Lending Guidelines." https://www.canada.ca/en/financial-consumer-agency
- Statistics Canada. (2024). "Business Financing and Growth Survey." https://www.statcan.gc.ca
