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ASSET-BASED LENDING / ASSET-BASED LOAN CREDIT FACILITY
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“Capital isn’t about what you earn. It’s about what you can put to work.” — Attributed to J.P. Morgan
ABL Loan Facility for Business in Canada: A Practical Guide to Asset-Based Lending
Table of Contents
What Is an ABL Loan Facility for Business?
ABL Marries Assets and Cash Flow
ABL Is Non-Bank Financing
The Growth of Asset-Based Lending in Canada
Who Can Access an ABL Facility?
How Borrowing Power Increases Under ABL
Reporting Requirements and Compliance
Conclusion: Is an ABL Loan Facility Right for Your Business?
What Is an ABL Loan Facility for Business?
An ABL loan facility for business converts the tangible assets on your balance sheet—receivables, inventory, and equipment—into a flexible, revolving credit line that scales with your company’s actual sales activity, making it one of the most practical alternatives to traditional bank financing available to Canadian business owners today.
An ABL loan facility for business is a revolving line of credit secured by company assets.
It differs from traditional bank lending because funding availability is driven primarily by collateral value rather than historical profitability.
In Canada, asset-based lending is widely used as an alternative to conventional bank operating lines.
When Banks Say No, Your Assets Say Go: The ABL Loan Facility Solution
Canadian business owners with strong assets and weak banking relationships face a painful contradiction: your balance sheet is healthy, but traditional lenders won’t extend the credit you need to grow.
The longer you wait, the more you risk losing contracts, delaying inventory purchases, and falling behind competitors who’ve already found flexible capital.
Let the 7 Park Avenue Financial team show you how An ABL loan facility for business solves this by turning your receivables, inventory, and equipment into a revolving credit line that adapts as your business grows—giving you fast, practical access to the working capital banks aren’t willing to provide.
3 Uncommon Takes on ABL Loan Facility for Business
1. ABL facilities can actually be cheaper than bank lines for fast-growing companies. Most people assume ABL costs more. In many cases, that’s true on a rate-per-dollar basis. But when your bank caps your borrowing at a fraction of what your assets support, the opportunity cost of that lost revenue dwarfs the rate difference. A manufacturing client borrowing $3 million from a bank versus $7 million on an ABL facility against the same collateral isn’t paying more—they’re investing in growth the bank wouldn’t fund.
2. An ABL facility doesn’t mean your company is in trouble. The old stigma is dying. Some of the largest, best-run companies in Canada use asset-based lending precisely because it offers flexibility that cash-flow lending can’t. Companies in acquisition mode, seasonal businesses, and turnaround situations all benefit—but so do healthy, profitable firms that simply want to keep their options open and avoid the restrictive covenants banks require.
3. ABL monitoring requirements can actually improve your business operations. One of the common objections to ABL is the frequent reporting. Here’s what nobody tells you: the discipline of regular collateral reporting forces better inventory management, faster receivable collections, and tighter financial controls. We’ve seen clients at 7 Park Avenue Financial improve their cash conversion cycle by 15–20 days simply because ABL reporting made them pay closer attention to their own numbers.
ABL Marries Assets and Cash Flow
An asset-based loan facility aligns working capital with real-time asset values.
Borrowing capacity increases as receivables and inventory grow.
This structure directly connects sales growth to liquidity.
Business owners and financial managers seek clarity on:
Borrowing base calculations
Advance rates on assets
Covenant requirements
Flexibility compared to bank credit lines
An ABL facility answers those questions with transparent formulas and structured reporting.
ABL Is Non-Bank Financing
Most ABL facilities in Canada are provided by independent finance companies and other alternative financing sources rather than traditional banks such as Royal Bank of Canada or Toronto-Dominion Bank.
The facility consolidates multiple asset classes under one revolving credit structure, including:
Accounts receivable
Inventory
Equipment and fixed assets
Commercial real estate (when applicable)
This integrated structure often provides more flexibility than a standard bank operating line.
The Growth of Asset-Based Lending in Canada
Asset-based lending has expanded significantly across the Canadian market.
It is used by public companies, private enterprises, start-ups, and turnaround situations.
The model is positioned as a scalable alternative to traditional chartered bank credit facilities.
Two principal advantages drive adoption:
Increased borrowing power
Reduced reliance on net income performance
Unlike bank underwriting, which emphasizes debt-service coverage and profitability, ABL underwriting focuses on asset quality and liquidity.
Who Can Access an ABL Facility?
Both public and private companies can access an ABL loan facility for business through Canadian asset-based lending companies.
Industry sector is typically less important than asset composition and reporting discipline.
A borrowing base is established—usually calculated monthly—and availability fluctuates with eligible collateral.
How Borrowing Power Increases Under ABL
Borrowing power expands because multiple asset classes are margined simultaneously under asset-based lending solutions in Canada.
Typical advance rates include:
Accounts receivable: up to 85–90% of eligible receivables
Inventory: 25–75%, depending on type and turnover
Equipment and fixed assets: negotiated term components
Real estate: separate appraisal-based advance rates
When combined under one facility, companies often achieve 50–100% more availability than under a traditional bank line.
In growth scenarios, liquidity increases automatically as sales rise.
Reporting Requirements and Compliance
ABL reporting is more rigorous than conventional bank reporting.
Lenders typically require:
Monthly receivables aging
Monthly payables aging
Inventory reports
Monthly balance sheet
Monthly income statement
Periodic field audits
While more demanding, this reporting discipline improves financial visibility and internal controls.
Over time, management teams often gain stronger cash-flow forecasting capabilities.
CASE STUDY: ABL LOAN FACILITY IN ACTION
Company: ABC Company — Mid-market food and beverage manufacturer, Ontario, Canada
Annual Revenue: $18 million
Challenge
ABC Company’s bank reduced their operating line from $4 million to $2.5 million after two consecutive years of declining EBITDA—despite the company having $6.2 million in receivables and $3.8 million in finished goods inventory. The reduced credit line left them unable to purchase raw materials for a confirmed $2.4 million contract with a national grocery chain. The owner faced a genuine risk of losing a flagship customer.
Solution
7 Park Avenue Financial structured an ABL loan facility for ABC Company secured by their receivables and inventory. The facility included an 80% advance rate on eligible receivables and a 60% advance rate on eligible finished goods inventory, providing a total borrowing base of approximately $7.2 million—nearly triple their previous bank line.
Results
• Borrowing capacity increased from $2.5 million to $7.2 million
• ABC Company fulfilled the $2.4 million grocery chain contract and added two additional accounts
Key Takeaways
An ABL loan facility for business is secured by receivables, inventory, equipment, and real estate.
Borrowing capacity is based on a borrowing base formula, not solely on profitability.
Advance rates can reach 85–90% on receivables.
ABL facilities often increase borrowing power by 50–100% compared to traditional bank lines.
Reporting requirements are stricter but improve financial discipline.
Asset-based lending is widely used across industries in Canada.
Conclusion: Is an ABL Loan Facility Right for Your Business?
If your company faces working capital constraints despite strong assets, an ABL loan facility for business may provide a solution.
It offers scalable liquidity, higher borrowing power, and flexibility tied directly to operational performance.
Call 7 Park Avenue Financial , a trusted, credible and experienced Canadian business financing advisor to assess eligibility and structure the appropriate facility.
FAQ/ FREQUENTLY ASKED QUESTIONS
How does collateral eligibility in an ABL loan facility impact total borrowing capacity?
ABL loan facility borrowing capacity is directly tied to what qualifies as eligible collateral. Not all receivables count—invoices over 90 days, cross-aged accounts, government receivables, and intercompany balances are typically excluded. Similarly, slow-moving or obsolete inventory is removed from the borrowing base. A company with $10 million in total receivables might have only $7 million in eligible receivables after ineligibles are removed. Understanding eligibility criteria before applying helps set realistic borrowing expectations.
What is the difference between a full-turnkey ABL facility and a receivables-only ABL facility?
ABL loan facility structures range from receivables-only lines to full-turnkey facilities that include receivables, inventory, equipment, and real estate. A receivables-only ABL is simpler to administer and has lower monitoring costs. A full-turnkey facility maximizes total borrowing power by leveraging all available asset classes but requires more reporting and higher lender due diligence. The right choice depends on your borrowing needs and the composition of your balance sheet.
How do Canadian ABL lenders handle cross-border receivables in an ABL loan facility?
ABL loan facility treatment of cross-border receivables varies by lender. Some Canadian ABL providers exclude U.S. or foreign receivables entirely. Others will include foreign receivables if they are insured through Export Development Canada (EDC) or a private credit insurer. The advance rate on cross-border receivables is typically lower than domestic accounts. If your business has significant export sales, confirming the lender’s policy on foreign receivables is a critical step in the due diligence process.
How is an ABL loan facility different from a bank line of credit?
A traditional bank line emphasizes profitability, cash flow, and debt-service ratios.
An ABL facility focuses primarily on asset quality and collateral value.
This makes ABL more accessible to companies in growth, turnaround, or transition phases.
How does the borrowing base work in an ABL facility?
The borrowing base is calculated monthly based on eligible collateral.
Advance rates typically range from 85–90% on receivables and 25–75% on inventory.
Availability increases or decreases as asset levels change.
What assets qualify as eligible collateral?
Eligible collateral usually includes:
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Current accounts receivable
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Saleable inventory
-
Equipment and fixed assets (in structured facilities)
-
Commercial real estate (if included)
Receivables over 90 days, intercompany balances, and obsolete inventory are generally excluded.
How much can a business borrow under an ABL facility?
Borrowing capacity depends on asset size and eligibility.
Many companies experience a 50–100% increase in available working capital compared to a conventional bank line.
The exact amount is determined by the borrowing base certificate.
Is asset-based lending expensive?
ABL pricing typically includes interest plus monitoring and field exam fees.
While rates may be higher than prime bank lending, increased availability often offsets the cost.
For asset-rich but cash-flow-constrained businesses, ABL can be cost-effective.
What reporting is required under an ABL loan facility?
ABL lenders require structured monthly reporting.
This typically includes receivables aging, payables aging, inventory reports, and financial statements.
Periodic field examinations verify collateral accuracy.
Can start-ups qualify for an ABL loan facility?
Start-ups with strong receivables and inventory may qualify.
ABL approval depends more on asset quality than on profitability history.
However, minimum revenue thresholds often apply.
How long does it take to set up an ABL facility?
Implementation typically takes 30–60 days.
The process includes due diligence, collateral review, legal documentation, and system integration.
More complex, multi-asset facilities may require additional time.
Is an ABL loan facility suitable for export-driven businesses?
Yes, but lender policy on foreign receivables varies.
Some lenders include insured export receivables, particularly when backed by Export Development Canada.
Advance rates on cross-border receivables are often lower than domestic accounts.
Key Statistics: ABL Loan Facility for Business
The global asset-based lending market exceeded USD 660 billion in 2023 and is projected to grow at 11–16% CAGR through 2030.
North America is the largest regional ABL market, representing the majority of global activity.
Canadian ABL lenders typically advance 70–85% on eligible receivables and 50–65% on eligible inventory.
Manufacturing and wholesale distribution represent the largest share of ABL usage in Canada.
ABL facilities generally close 40–60% faster than traditional bank loan approvals.
The Canadian sustainability-linked loan market is approximately C$45 billion, of which an estimated C$12 billion could be structured as ABL.
SMEs are an increasingly large segment of the ABL market globally, driven by tightened bank lending standards and the benefits of asset-based lending for Canadian SMEs.
Citations:
Industry Canada. "SME Financing Data Initiative." Innovation, Science and Economic Development Canada, 2024. https://www.ic.gc.ca.
Canadian Bankers Association. "Alternative Lending in Canada: 2024 Market Report." Toronto: CBA Publications, 2024. https://www.cba.ca.
Statistics Canada. "Small Business Financing Data." Government of Canada, 2024. https://www.statcan.gc.ca.
Secured Finance Network. "Annual Asset-Based Lending and Factoring Survey." New York: SFNet, 2024. https://www.sfnet.com.
Linkedin/Stan Prokop/7 Park Avenue Financial ."ABL Loan for Business: Your Assets, Your Capital, Your Growth" . https://www.linkedin.com/pulse/abl-loan-business-your-assets-capital-growth-stan-prokop-u2zic/
KPMG Canada. "Asset-Based Loans as Sustainability-Linked Loans." Toronto: KPMG, 2024. https://kpmg.com/ca.
The Business Research Company. "Asset-Based Lending Global Market Report 2025." London: TBRC, 2025. https://www.thebusinessresearchcompany.com.
Medium / 7 Park Avenue Financial. " ABL Loan Facilities: Unlocking Hidden Capital in Your Business Assets" .https://medium.com/@stanprokop/abl-loan-facilities-unlocking-hidden-capital-in-your-business-assets-0a65f1980fb1
