YOUR COMPANY IS LOOKING FOR AN ABL ASSET-BASED LENDING CREDIT REVOLVER FACILITY HERE IN CANADA!
ASSET BASED LOANS IN CANADA
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Financing & Cash flow are the biggest issues facing business today
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Quote
"Assets put to productive use have a value. Assets in the hands of a creditor are often worthless." — Wilbur Ross, Investor and Former U.S. Secretary of Commerce
This quote captures the essence of asset based lending—recognizing that assets actively employed in your business operations create value that traditional lenders often fail to appreciate when evaluating financing requests.
Does an Asset-Based Loan Facility Work for Your Company?
Table of Contents
Introduction
The Asset-Based Financing Solution
How Asset-Based Lending Works
Why Choose Asset-Based Lending
Asset-Based Lending Rates
Conclusion
FAQ
Key Takeaways
Introduction
The Working Capital Gap That's Strangling Your Growth
Your business has valuable assets sitting on the balance sheet, but your bank account tells a different story.
You're watching opportunities slip away while waiting for traditional financing that may never arrive.
Let the 7 Park Avenue Financial asset based lending team show you how an asset based loan facility bridges this gap immediately, converting your existing assets into working capital without the lengthy approval processes that cost you time and money.
3 Uncommon Takes on Asset Based Loan Facilities
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Asset based lending isn't just for struggling companies—it's often the smartest choice for rapidly growing businesses that have outpaced their traditional credit lines. Your growth is creating valuable inventory and receivables faster than your balance sheet can keep up, making asset based facilities the fuel that matches your momentum.
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The "rejection" from your bank might be the best thing that happened to your financing strategy. Traditional lenders often overlook the real value in your business because they're stuck evaluating yesterday's numbers instead of today's tangible assets.
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Asset based loan facilities can actually cost less than you think when you factor in the opportunity cost of slow-moving capital. The speed and flexibility often generate returns that dwarf any rate differential compared to conventional loans you might wait months to secure.
The classic business case is often described as a tool to support planning and decision-making. Yet many owners still ask whether a strong case exists for an asset-based loan (ABL) facility.
For Canadian businesses comparing ABL lines to bank credit lines or unsecured traditional loans, the answer is yes.
Here is why an ABL facility can outperform traditional financing.
The Asset-Based Financing Solution
More financing is not always better, but flexible working capital is a powerful advantage.
An ABL facility increases borrowing capacity because funding is based solely on asset values.
This eliminates reliance on heavy covenants, ratio tests, and personal guarantees common in bank lending.
Many firms cannot meet strict commercial banking requirements tied to cash flow ratios.
Asset-based lending bypasses those hurdles.
It offers a practical alternative for businesses with strong assets but uneven cash flow.
Remember, access does not mean obligation.
You draw only what you need from the facility.
The availability itself provides stability for Canadian SMEs that face daily cash flow challenges.
How Does Asset Based Lending Work?
ABL facilities are built on a borrowing base supported by eligible assets.
Most lenders rely on borrowing-base reports similar to those used by commercial banks.
This structure provides predictable and scalable capital.
Key collateral categories / pledged assets include:
Accounts receivable (usually advanced at up to 90%)
Inventory (typically 30%–70% depending on category and liquidation value)
Equipment and fixed assets - key balance sheet assets
Commercial real estate equity
Intellectual Property
Fixed assets and real estate can be added to the same facility.
They may also be carved out as a separate term loan or bridge loan.
This blended structure increases total borrowing power.
Businesses do not need a perfect mix of receivables and inventory.
You can still qualify if one asset class dominates.
Some firms have only inventory or only receivables and still obtain an ABL line.
Why Choose Asset-Based Lending
An ABL facility secures financing against tangible assets.
This appeals to firms that cannot obtain full funding from traditional lenders.
It also supports companies experiencing growth or volatility.
ABL facilities strengthen liquidity by turning assets into usable capital.
They are also effective in refinancing existing debt.
Many firms use ABL solutions to fund expansions and acquisitions.
Asset-Based Lending Rates
ABL Cost / Pricing depends on collateral quality, margining, and monitoring requirements.
Canadian banks offer competitive pricing for large ABL facilities, but require higher minimums.
Non-bank lenders provide more flexibility and serve mid-market borrowers.
ABL financing supports both growth and survival strategies.
It can also fund acquisitions of competitors or strategic partners.
Using ABL reduces the cash needed to complete such transactions, which improves deal structure.
CASE STUDY: Asset Based Loan Facility — Summary
Company: ABC Company, an Ontario electrical supply distributor with $8M annual revenue.
Challenge
ABC hit a growth ceiling when its bank line maxed out at $750,000. New contracts required $1.2M in combined inventory and receivables, but the bank refused an increase due to leverage metrics and short-term profitability dips.
The firm risked losing a $400,000 order and couldn’t wait for 90-day term-loan approvals or dilute ownership through equity.
Solution
ABC secured a $2M asset based loan facility that advanced 80% of receivables and 55% of inventory.
The facility closed in 23 days, expanded automatically as receivables grew, required minimal covenants, and improved working-capital visibility through monthly reporting.
Results
Revenue grew to $12.5M within 18 months (56% increase).
Borrowing base expanded to $2.8M.
No equity dilution; full operational control retained.
Cash conversion cycle improved by 12 days.
Company positioned as a reliable supplier for large orders and gained a competitive advantage.
Key Takeaways
Asset-based loan facilities increase borrowing capacity by focusing on asset values, not covenants.
ABL lines of credit are ideal for firms with strong asset bases and inconsistent cash flow.
Receivables are typically advanced at up to 90%; inventory at 30%–70%.
ABL supports growth, acquisitions, refinancing, and working capital needs.
Facilities can bundle receivables, inventory, equipment, and real estate for maximum leverage.
Non-bank lenders offer flexible structures for mid-market companies.
Conclusion — Asset-Based Lending | ABL Finance
The business case for ABL is clear.
It delivers predictable liquidity, strong borrowing power, and financial stability.
For Canadian companies seeking working capital or restructuring options, ABL can be a superior financing solution.
Speak with 7 Park Avenue Financial, a trusted and experienced Canadian financing advisor, to explore asset-based loans, cash-flow lending, and other funding solutions tailored to your business.
FAQ: Frequently Asked Questions
What is asset-based lending?
Asset-based lending is business financing secured by collateral such as receivables, inventory, equipment, or real estate.
It is structured as a revolving line of credit based on asset values.
It is strictly commercial financing, not consumer lending.
How does an ABL facility work?
An ABL facility advances funds based on the value of eligible business assets.
Common collateral includes receivables, inventory, equipment, and real estate.
Rapid-growth companies and firms with higher leverage often use ABL facilities to access the credit banks cannot provide.
Statistics on Asset Based Loan Facilities
Market Size: The asset based lending market in North America exceeded $800 billion in outstanding commitments as of 2023, representing significant growth from approximately $590 billion in 2018.
Approval Speed: Asset based loan facilities typically close within 30-45 days compared to 60-90 days for traditional bank loans, providing 40-50% faster access to capital.
Advance Rates: Canadian asset based lenders typically advance 75-85% against eligible accounts receivable and 50-65% against inventory, creating borrowing capacity substantially higher than traditional working capital loans.
Credit Availability: Approximately 60% of businesses that apply for asset based financing have been declined by traditional banks, demonstrating the facility's role in serving creditworthy companies facing conventional lending barriers.
Industry Concentration: Distribution and wholesale businesses account for approximately 35% of asset based lending volume, followed by manufacturing at 30% and retail operations at 15%.
Growth Correlation: Companies using asset based facilities experience average revenue growth rates 25-30% higher than comparable businesses using traditional financing, according to industry studies.
Default Rates: Asset based loans historically show default rates of 1-2%, significantly lower than unsecured commercial lending, demonstrating the effectiveness of collateral-based underwriting.
Citations
Commercial Finance Association. "Asset-Based Lending: A Guide for Business Owners." CFA Industry Report, 2023. https://www.cfa.com
Substack / Stan Prokop." Comparing Business Credit Lines: Which One's Right for You?". https://stanprokop.substack.com/p/comparing-business-credit-lines-which
Business Development Bank of Canada. "Alternative Financing Solutions for Canadian SMEs." BDC Resources, 2024. https://www.bdc.ca
Deloitte Canada. "The State of Asset-Based Lending in Canada." Financial Advisory Services Report, 2023. https://www.deloitte.ca
Medium / Stan Prokop ."Are ABL Business Collateral Loans the Future of Canadian Financing — Why An Asset Based Loan Works" . https://medium.com/@stanprokop/are-abl-business-collateral-loans-the-future-of-canadian-financing-why-an-asset-based-loan-works-5fdd98e17c29
Norton Rose Fulbright. "Asset-Based Lending: Legal and Practical Considerations." Canadian Banking Law Journal, vol. 42, no. 3, 2023, pp. 156-189. https://www.nortonrosefulbright.com
Canadian Bankers Association. "Commercial Lending Trends and Alternatives." CBA Industry Analysis, 2024. https://www.cba.ca
PwC Canada. "Working Capital Management Through Asset-Based Lending." Financial Services Insights, 2023. https://www.pwc.com/ca
Linkedin."Cash Flow Revolution: Why Canadian Business Chooses Asset Based Lending" .https://www.linkedin.com/pulse/cash-flow-revolution-why-canadian-business-chooses-asset-stan-prokop-4bc9c/
RSM Canada. "Asset-Based Lending: An Overview for Middle Market Companies." Advisory Services Publication, 2024. https://www.rsmcanada.com
Institute of Corporate Directors. "Financing Growth: Board Perspectives on Alternative Capital." ICD Reports, vol. 28, no. 2, 2023, pp. 45-67. https://www.icd.ca
7 Park Avenue Financial." Asset-Based Lending: Funding Canadian Businesses with Flexible Financing" .https://www.7parkavenuefinancial.com/asset-based-lending-business-bank-abl.html
