YOU’RE LOOKING FOR ASSET BASED LENDING SOLUTIONS!
A FLEXIBLE FINANCING OPTION - THE BENEFITS OF ASSET BASED LENDING
UPDATED 05/24/2025
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WHAT YOU NEED TO KNOW ABOUT ASSET-BASED FINANCING IN CANADA - INTRODUCTION TO THE LOAN BASED ON ASSETS
What if you need to finance your company’s growth? Are there only traditional methods of funding available?
Asset-based lending is the new alternative for working capital in Canadian Business Financing!
INTRODUCTION - THE WORKING CAPITAL FINANCING SOLUTION YOU'RE LOOKING FOR - ASSET-BASED LENDING IN CANADA!
WHAT IS ASSET-BASED LENDING?
Sometimes the traditional methods of business funding don't work for all firms - one option remains asset-based lending!
Transactions are structured as either business revolving credit lines or, in some cases, term loans on specific assets.
Asset-based lending is a type of business financing allowing companies to secure financing using business valuable asses as collateral -
We will focus here on how your business can qualify, how the lending process works and how companies benefit from Asset-based lending, aka ' ABL '.
ABL financing uses sales and business assets as collateral to secure financing.
The most common forms of collateral are the accounts receivable generated from sales, as well as inventories, fixed assets, and even commercial real estate if owned by the company.
A quick explanation of how commercial ABL lending works will help make sense of choices in whether or not they're the right fit -
The idea behind asset-based loans is simple -
The asset lender lends your business assets as security instead of relying solely on business credit history and cash flow, and profits - those latter 3 being the cornerstones of Canadian banks and commercial bank financing.
Breaking Free from Banking Barriers
Traditional financing leaves countless Canadian businesses stranded when they need capital most.
Your strong assets sit idle while banks focus on credit scores and lengthy approval processes. Meanwhile, opportunities slip away, and cash flow tightens.
Let the 7 Park Avenue Financial team show you how asset-based lending transforms your existing business assets into immediate working capital, bypassing traditional banking obstacles completely.
WANT PROOF? --> WE'VE GOT IT
THE KEY BENEFIT OF ASSET-BASED FINANCE
Asset-based loans provide a business with the working capital and cash flow needed while retaining ownership and use of the assets.
These assets in turn generate business revenues, giving the company the flexibility that traditional lending from financial institutions such as banks can't provide when a company can't meet bank credit criteria.
Borrowing directly against your company's assets, such as accounts receivable or inventory, and physical assets / fixed assets/equipment and real estate, all in one facility,y is the 'ABL ' solution -
Companies experiencing rapid growth and new growth opportunities are solid candidates for asset finance
HOW DOES ASSET BASED LENDING WORK IN CANADA
In a nutshell, asset-based lending is a form of cash flow financing and monetization of your business assets.
The asset lender allows you to secure loans based on the value of your business assets and can be ideal for businesses unable to access all of the Canadian bank financing they need. In many cases, these loans can be used to purchase a business.
Typical percentages of funding are 90% of your accounts receivable and pre-agreed percentages on inventory, equipment, and commercial real estate.
These percentages are typically always high leverage and have higher advances than bank loans or bank business lines of credit
Business owners applying for asset-based loan solutions should have a strong understanding of the business assets on the balance sheet and their values.
In certain cases on the larger transactions, an appraisal of key assets might benefit both borrower and lender. The ability to provide proper financials and related documents on the business is key.
Businesses will always benefit from the value of proper sales and financial projections that will demonstrate repayment ability.
A proper business plan will always be beneficial - 7 Park Avenue Financial prepares business plans for clients that meet and exceed bank and commercial lender / asset-based lender requirements.
REAL ESTATE ASSET BASED LENDING
Asset based lending for real estate is also available and is often structured as a term loan.
An asset-based lending mortgage is often structured as a short-term bridge loan. Many businesses will benefit from ABL short-term bridge loans for real estate used as collateral.
FINANCING YOUR BALANCE SHEET ASSETS
Asset-based loans are not your average loan. In fact, they examine the value of your tangible assets and use those assets as collateral, using them in case there is any chance that there could be a risk of default!
With asset-based financing solutions via 7 Park Avenue Financial, entrepreneurs have another option to fund their growth and business capital needs -
When it comes to asset based loan rates, Costs are reasonable and commensurate with your overall credit quality and long-term prospects
Business owners should always consider if traditional bank financing is a better option than funding the balance sheet via an ABL loan.
For businesses that qualify for bank financing, bank lines of credit and other working capital solutions offered by traditional financial institutions might be more appropriate, if the business qualifies for bank credit approval.
Businesses that might not necessarily require a full asset-based credit line should consider factoring receivables as a full working capital solution for cash flow needs.
FINANCING BUSINESS GROWTH WITH FLEXIBLE ASSET BASED LENDING
ABL lenders provide a super flexible solution that can be tailored to your individual needs. Asset-based finance is an exciting new trend in the Canadian finance world -
Asset-based lending banks and commercial finance companies offer businesses with unique needs and situations a chance to get funding that would otherwise be denied in traditional banking financial institutions for solutions such as revolving lines of credit.
NO OWNERSHIP EQUITY DILUTION
Asset lenders are a great option for entrepreneurs because they offer the benefit of not having to access additional equity financing.
Asset-based lending offers a huge advantage to business owners in today’s economy, with the ability to monetize your assets for an ongoing line of credit and cash flow needs.
With normal loans based on traditional financial metrics like profit margins or revenue growth rates, the asset-based finance solution offers access to business capital not available from traditional financial institutions.
MAXIMIZING LIQUIDITY
One thing that makes asset-based lending great is being able to monetize your assets on an ongoing basis as your company grows and assets fluctuate based on sales levels and capital acquisitions.
This can be really important during challenging economic times like these, where you may need cash but can't access a traditional loan in timeframes that make sense for your business needs.
THE ASSET-BASED LOAN DIFFERENCE - LITTLE OR NO COVENANTS & GREATER CREDIT AVAILABILITY WHEN QUALIFYING FOR ABL FINANCE
Qualifying for asset-based lending solutions requires that a company meet specific basic criteria -
The key criteria, of course, are having enough sales and collateral to secure the financing. Asset-based lenders will also look at the overall credit history of the company, as well as the company's ability to prepare ongoing financial statements and aged listings of key assets such as accounts receivable and inventory.
ABL lenders typically do a higher level of due diligence as the financing they provide does not rely on the financial covenants and ratios that banks focus on.
They want to be sure the company can regularly report on progress and asset values.
Repayment of asset-based lines of credit is made on a revolving basis as the company receives cash inflows from collections.
The fear of not meeting loan terms due to uncertain visibility into the future is a scary situation, especially during these economic times.
Asset-based loans have few covenants but often come with higher interest rates. Interest rates on asset-type loans are generally higher than rates on unsecured loans from banks.
CAN YOUR BUSINESS BENEFIT FROM ASSET BASED LENDING?
Every industry in Canada qualifies for and can benefit from ABL lending -
If a business has sales, assets, and growing receivables and inventory, companies in sectors such as manufacturing, distribution, retail, and transportation can benefit.
CASE STUDY
Toronto-based metal fabricator XYZ Manufacturing faced a critical challenge when a major contract required $500,000 in raw materials upfront, but their bank couldn't approve additional credit due to existing debt ratios. With 60-day payment terms from their customer and immediate supplier demands, cash flow was impossible.
Within three weeks, 7 Park Avenue Financial structured an asset based lending facility using their $800,000 inventory and $300,000 in accounts receivable as collateral. The $650,000 credit line provided immediate working capital to purchase materials and complete the contract.
Results: XYZ Manufacturing delivered the project on time, earned $150,000 profit, and established the credit relationship that supported two additional contracts worth $1.2 million over the following year. The asset based lending solution transformed a cash flow crisis into a sustained growth opportunity.
CONCLUSION - ASSET-BASED LENDING IS THE COMMERCIAL BANKING ALTERNATIVE
ABL products are a great option for businesses in need of funds.
The collateral required with these loans is the assets you already own! , as well as the future sales you generate, that makes for a more flexible and customized solution when compared to traditional lines of credit.
Businesses considering asset based lending should focus on key requirements and processes in the asset-based loan solution. Any business having sales and assets that can't qualify for traditional lending can benefit from asset finance solutions.
The ability to pass proper due diligence as well as reporting capabilities are key to ABL success - providing a valuable tool for accessing working capital and a finance structure suited to your business needs.
So, what is ABL? Will it work for your company?
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian Business Financing advisor with a strong reputation, who can assist you in your growth financing needs.
Our team will ensure you are aware of all your financing options and ensure you will qualify for the maximum financing at competitive interest rates.
FAQ: FREQUENTLY ASKED QUESTIONS
What is the cost of asset-based lending?
Asset-based lending will commonly have a higher interest rate and financing cost so businesses should consider the costs associated with asset-based lending versus other options available.
What are the forms of asset based lending
Asset-based lending is a type of financing backed by the assets of the business. The most common assets used to secure asset finance lines of credit or term loans include accounts receivable, inventory, and property, plant & equipment. Flexible equipment financing via lease financing is always recommended.
What is an asset-based lending approach to financing?
The business of asset based lending is all about sales growth and pledged asset collateral. Collateral is an important part of any asset-based lending agreement. Lenders will make loans backed by physical assets and other collateral of the company - this is different from an unsecured loan via a covenants-based bank solution.
How does a business qualify for asset based lending?
ABL loans are based on business assets that meet certain requirements around the ability of asset-based lenders to convert assets into cash. Liquidation values are placed on different assets - for example, receivables are typically financed at 90% of their face value.
Citations / More Information
- Bank of Canada Commercial Lending Survey 2024 - https://www.bankofcanada.ca
- Canadian Bankers Association Alternative Lending Report - https://www.cba.ca
- Industry Canada Small Business Financing Statistics - https://www.ic.gc.ca
- Commercial Finance Association Annual Study - https://www.cfa.com
- TD Bank Commercial Lending Trends Report - https://www.td.com
- RBC Capital Markets Asset Based Lending Analysis - https://www.rbccm.com
