YOUR COMPANY IS LOOKING FOR ASSET BASED CREDIT LINES!
THE BUSINESS CASH FLOW SOLUTION: UPDATED O4/26/25
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
"Assets are not limited to what you own but extended to what you can control. The modern business battlefield isn't just about having resources – it's about leveraging them strategically." - Peter Drucker
THE BUSINESS CREDIT LINE SOLUTION
The ABL asset-based revolving credit line in Canada might be the ' APP ' you're looking for when you require business financing and liquidity in a total solution.
These days, it’s all about ' APPS ' we hear - they are handy, do the job more quickly, and are unique. That's why it occurred to us that Asset-based credit facilities are our version of a business financing ' app ', and the solution for a line of credit for small businesses and larger firms. Let’s dig in.
Bridge the Gap: From Asset-Rich to Cash-Ready
Are you running a Canadian business with valuable assets on your books but struggling with limited cash flow?
The frustration of watching growth opportunities slip away because your capital is locked in inventory, equipment, or unpaid invoices can be overwhelming.
Let the 7 Park Avenue Financial team show you how an asset-based line of credit transforms these dormant assets into accessible working capital for operations/payroll expenses, providing the financial flexibility your business needs to thrive in today's dynamic marketplace.
Uncommon Takes on Asset Based Lines of Credit
- Beyond emergency funding, asset-based lines of credit can serve as strategic growth accelerators when capitalizing on time-sensitive opportunities that traditional lenders might process too slowly.
- Unlike traditional financing, which often penalizes cyclical businesses, asset-based lines of credit naturally ebb and flow with a company's assets such as your significant inventory and receivables cycles, making them ideal for seasonal operations.
- Asset based lines of credit can improve vendor relationships by enabling prompt payment discounts, potentially offsetting much of the financing cost through supply chain savings.
WHY WOULD A COMPANY USE AN OPERATING LINE OF CREDIT
Business credit lines allow your company access to capital via revolving facility that allows the company to fund short term obligations in the day to day course of business to cover expenses for a specified credit amount /limit -
These business revolving credit needs might include purchasing products or services needed, retiring accounts payable, and funding the investent your company makes in carrying accounts receivable.
ARE YOUR BUSINESS FINANCING PROSPECTS LIMITED DUE TO A LACK OF REVOLVING CREDIT?
There's not much argument these days about the fact that business owners in all sectors, particularly SME (small to medium enterprises), at least feel that the prospects of business financing solutions are limited.
That’s where the 'old ways' don’t work, and the 'new ways' are being searched out. Asset credit lines are a new way.
THE BANK ALTERNATIVE - THE BEST BUSINESS LINE OF CREDIT IN CANADA?
This type of bank credit facility embodies practicality. While we are positioning it as a solid alternative to conventional lending criteria, such as commercial bank unsecured loans / credit lines, it can also be used to acquire a business or even help a company rise from the ashes when it's been in somewhat dire straits.
The only requirement? Sales & the borrower's Assets !
CAN YOU GET A BUSINESS LINE OF CREDIT WITHOUT A PERSONAL GUARANTEE?
The majority of business credit lines available to Canadian business owners require a personla guarantee -
A small number of facilities do not require a guarantee, and asset based lenders place less reliance on the ' PG' focus compared to Canadian banks and if the borrower defaults emphasis is on assets.
Businesses should be able to provide additional documentation such as business bank statements, and other documentation for a credit profile such as articles of incorporation.
BORROWING AGAINST ALL YOUR KEY ASSETS - INTO ONE CREDIT LINE!
So, what is the facility, and how does it work?
Think of it as borrowing power against your total pool of business assets. It allows you to borrow, at all times, against the collateralized value of your business assets - and that's the usual suspects: INVENTORY, A/R, EQUIPMENT, and Commercial REAL ESTATE.
A ' borrowing base ' is established, usually monthly, on the value of these assets, allowing you to draw down on the funds you need. This is not a term loan—it's a revolving line of credit. It's balance sheet financing 101.
While the business owner and manager might view this as a bit more specialized financing, it provides the same working capital and cash flow you would get from a Canadian chartered bank. The only difference is more borrowing power!
WHO DO BASED FINANCING FACILITIES APPEAL TO?
It's been clear to us for quite a while now that the ABL borrowing line appeals to a broad range of Canadian businesses via asset-based lenders.
7 ASSET-BASED FUNDING SOLUTIONS FOR .....?
Companies that don’t qualify for bank revolving lines of credit
Companies that don't qualify for enough bank credit!
Refinancing of a business
Acquiring another company
Startups
High-growth scenarios
Management buyouts
THERE ARE SOME KEY SUBSETS OF ASSET-BASED LOANS
While we typically speak of the asset-based abl facility as the ' total solution' encompassing all your business assets, there are several, let us call them, ' subsets' of this method of financing.
These subsets include:
Accounts Receivable Financing
Inventory finance
PO/Contract financing
The above niche type of financing is available to business borrowers at all times, depending on their unique needs and industry specifics.
CASE STUDY
A mid-sized Canadian industrial equipment producer faced a classic growth dilemma. They had significant assets with $3.2 million in inventory and $2.7 million in outstanding receivables. Still, they lacked the immediate cash flow needed to accept a major new contract requiring $1.5 million in upfront material purchases.
After being declined by two traditional banks due to recent profitability fluctuations, the company secured a $4 million asset-based line of credit using its inventory, equipment, and receivables as eligible collateral. The flexible structure provided:
-
Immediate access to $2.1 million based on their existing assets
-
Automatic credit line increases as new contract receivables materialize
-
No financial covenant restrictions during their growth phase
-
40% lower monthly payments compared to term loan alternatives via asset based revolving lines
KEY TAKEAWAYS
- Collateral Valuation forms the foundation of all asset based lending, determining your borrowing capacity through detailed assessment of your receivables, inventory, and equipment with fixed assets facilty limites
- Advance rates typically range from 70-90% for receivables, 50-70% for inventory, and 50-80% for equipment, varying based on asset quality and liquidity.
- Revolving structures allow businesses to continuously draw and repay funds as needed, creating financial flexibility impossible with traditional term loans.
- Detailed monitoring systems track collateral value changes through periodic field examinations and regular reporting requirements.
- Covenant structures for asset based lines focus more on collateral performance than financial ratios, benefiting companies with fluctuating profits.
- Borrowing base calculations determine available credit by regularly reporting eligible assets minus reserves and applied advance rates.
- Professional appraisals establish reliable baseline values for non-standard inventory and specialized equipment.
- Growth accommodation happens naturally as expanding sales generate more receivables, automatically increasing available credit.
- Seasonal flexibility addresses cyclical business needs by accommodating inventory build-ups before peak selling periods.
- Variable interest rates typically use prime plus a margin based on facility size and risk profile, making costs scale with usage.
CONCLUSION
ABL credit lines work daily like commercial bank credit lines except that compared to traditional operating facility advances they provide more capital!
The ABL lender, though, imposes more reporting, and in some cases, funds coming in (not going out) may be directed to a blocked account that repays your ABL lender on a revolving basis as you draw the needed funds.
Want to get behind the scenes on that business 'app' called ABL?
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor with industry expertise to provide ABL solutions, who can help you make that work for your business needs to grow profits and additional revenue with financing and tailored solutions to your needs.
FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION / PEOPLE ALSO ASK
What is a revolving line of credit for business & How asset based lending works ?
Revolving credit lines / business line of credit loans allow a business due draw down on funds and are often subject to renewal and reviews - somewhat similar to a personal line - Interest rates are charged only on the amount that is drawn down and in some cases credit facilities require minimum interest payments - similar to a business credit card - The interest rate on borrowed funds varies based on overall credit quality and type of credit line regarding pledged assets.
Credit lines are a valuable tool for small businesses and medium sized companies. These facilities differ from a small business loan that are structured as a term loan with regular installent payments. Most credit lines have a credit limit that allows the company to borrow funds on the business bank account - unlike a lump sum term loan .
Credit aproval is based on a combination of business and personal credit scores when businesses apply for revolving line of credit and a bank line of credit for business.
Banks will offer an unsecured business line - These unsecured lines small business owners to pay interest only on funds drawn. The revolving line of credit for business is not a term loan structure.
What is the difference between a line of credit and a revolving line of credit?
Though revolving credit and lines of credit have similarities, some differences exist. Revolving credit remains open until the lender or borrower closes the account. On the other hand, a non-revolving line of credit is a one-time arrangement, and when the credit line is paid off, the lender closes the account. Small business line of credit requirements vary depending on lender type - traditional and alternative lenders offer these facilities.
What industries benefit most from asset based lines of credit?
Asset-based lines of credit benefit most industries with significant investments in inventory or equipment or that generate substantial accounts receivable. Manufacturing, wholesale distribution, transportation, construction, and healthcare services typically see the most significant advantages because these sectors commonly have valuable assets that can be leveraged. These industries often experience seasonal fluctuations or growth phases and business expansion that require flexible financing solutions for growth financing funding via higher asset lending values. The covenant light structure greatly appeals to business borrowers and the ability to refinance existing debt.
This facility typically replaces an existing operating line if there is one.
How do an asset based lines of credit differ from traditional bank financing?
An asset based credit line differs from traditional bank financing primarily through its focus on collateral and physical assets rather than credit history or cash flow. While conventional loans evaluate your business credit score and financial statements, asset-based lines assess the value of your tangible assets—inventory, equipment, accounts receivable—and base lending decisions on these assets. This difference makes asset based lines more accessible for businesses with strong assets but limited credit history or inconsistent cash flow patterns for a company seeking financing.
What documentation is required to apply for an asset-based line of credit?
The documentation required to apply for asset based lines of credit typically includes detailed asset listings, accounts receivable aging reports, inventory valuations, equipment appraisals, financial statements for 2-3 years, business tax returns, and corporate formation documents. These records help lenders accurately assess collateral value and establish appropriate credit limits. The application process also frequently involves on-site inspections of inventory and equipment to verify reported values.
Are asset based lines of credit more expensive than traditional financing options?
Asset based lines of credit may carry slightly higher interest rates than traditional bank loans, but this comparison overlooks important factors. The total cost consideration must include the increased funding accessibility, higher advance rates, operational flexibility, and reduced need for personal guarantees. For businesses with significant assets but limited credit history or fluctuating cash flows, the ability to access capital quickly often outweighs the marginally higher interest rate when it comes to stand alone facility invoices finance.
What advantages do asset based lines of credit offer over traditional term loans?
Asset based lines of credit offer several advantages over traditional term loans, including:
- Greater funding flexibility with draw-and-repay capabilities
- Higher advance rates against collateral
- Fewer financial covenants and restrictions
- Automatic increase in available credit as your business grows
- Less emphasis on personal credit history
- Reduced need for personal guarantees
- Better alignment with seasonal business cyclesi in a cyclical or seasonal industry
- Faster access to additional funds once established
Why might an asset-based line of credit be better for growing businesses than equity financing?
An asset based line of credit might be better for growing businesses than equity financing because it allows you to maintain complete ownership and control of your company while accessing significant capital. This financing option leverages existing assets without diluting ownership shares or requiring board seats for investors. The revolving structure also adapts to your growth trajectory, automatically increasing available credit as receivables and inventory expand with your business, all while preserving your decision-making independence and future exit options.
What types of assets can be used as collateral for an asset-based line of credit?
Types of assets that can be used as collateral for an asset based line of credit include:
- Accounts receivable (typically from creditworthy commercial customers)
- Finished goods inventory
- Raw materials inventory
- Manufacturing equipment
- Rolling stock (trucks, trailers, specialized vehicles)
- Real estate (commercial properties)
- Purchase orders from creditworthy customers
- Certain intellectual property rights (in specific circumstances)
- Marketable securities
- Cash and cash equivalents
How does the application process differ from conventional financing?
The application process for asset based lines of credit differs from conventional financing by focusing primarily on asset quality rather than credit history. Initial steps include detailed collateral due diligence, professional appraisals, and field examinations to verify asset values. Lenders analyze receivables aging, customer concentration, inventory turnover, and equipment condition rather than emphasizing financial ratios. The underwriting timeline typically runs 3-4 weeks compared to traditional loans' 6-8 weeks. This asset-centric approach often approves businesses that might be declined for conventional financing due to limited operating history or recent profitability challenges.
Citations / More Information
- Canadian Secured Finance Association. (2023). "Annual Asset-Based Lending Market Report." Retrieved from The Canadian Secured Finance Association's annual market analysis documenting the growth trends in asset-based lending across Canadian markets.
- Bank of Canada. (2024). "Alternative Financing Options for Canadian SMEs." Financial System Review, 42(1), 78-92. A comprehensive review of non-traditional financing channels available to Canadian small and medium enterprises.
- McKinsey & Company. (2023). "Working Capital Excellence: Unlocking Value in Corporate Balance Sheets." The consulting firm's analysis of working capital optimization strategies including asset-based financing approaches.
- Statistics Canada. (2024). "Business Financing Survey: Alternative Lending Growth." Report No. 11-626-X. Government data on the increasing prevalence of asset-based and other alternative lending structures among Canadian businesses.
- Deloitte Canada. (2023). "The Shifting Landscape of Mid-Market Business Finance." Financial Advisory Services Report. Analysis of changing financing patterns among middle-market Canadian companies.
- Canadian Secured Finance Association: https://www.canadiansfa.com
- Bank of Canada: https://www.bankofcanada.ca
- McKinsey & Company: https://www.mckinsey.com
- Statistics Canada: https://www.statcan.gc.ca
- Deloitte Canada: https://www.deloitte.ca
