Asset Based Lending Facility: Unlock Capital From Your Balance Sheet Assets | 7 Park Avenue Financial

 

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YOUR COMPANY IS LOOKING FOR  AN ASSET BASED CREDIT FACILITY!

ASSET BASED LOANS AND LINES OF CREDIT IN CANADA

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Financing & Cash flow are the biggest issues facing businesses today.

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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

 

 

 

    

"Unlocking Your Business's Potential with Asset-Based Lending in Canada"  

 

  

 

Asset-based lending (ABL) means different things to different business owners.

 

 

In Canada, ABL financing typically refers to a working capital credit facility—a flexible business line of credit that serves as a strong alternative to traditional bank lending. Thousands of Canadian companies have discovered that ABL can make the impossible possible.

 

 

When Your Assets Are Strong But Your Bank Says No

 

 

Your business has valuable assets sitting on your balance sheet, but traditional lenders keep declining your applications. Each rejection chips away at your confidence and delays critical business decisions.

 

Let the  7 Park Avenue Financial team show you how an asset based lending facility changes this equation entirely—leveraging what you already own to unlock the capital your business deserves, regardless of credit hurdles that might be holding you back.

 

 

 

 

  

3 UNCOMMON TAKES ON ASSET BASED LENDING FACILITIES  

 

 

 

 

1. Asset based lending facilities often approve deals faster than traditional loans because the underwriting focuses on collateral verification rather than complex financial covenant analysis—this means your accounts receivable aging report matters more than your debt-to-equity ratio.

2. Companies experiencing rapid growth are sometimes viewed as risky by traditional banks, yet they're ideal candidates for asset based lending facilities because growing sales naturally create more receivables and inventory to borrow against.

3. An asset based lending facility can actually improve your negotiating position with suppliers and customers since reliable access to working capital means you can take advantage of early payment discounts and extend more competitive terms to buyers.

 

  

 

 

 

WHAT IS ASSET-BASED LENDING? TURNING ASSETS INTO WORKING CAPITAL

 

 

 

 

Asset-based lending (ABL) allows businesses to secure financing by leveraging assets such as receivables, inventory, or fixed assets. These assets are pledged as collateral, providing liquidity and steady cash flow through a revolving credit line. ABL facilities are tailored to a company’s financial needs and growth stage.

 

 

Common assets financed under ABL include:

 

 

• Accounts receivable – typically advanced up to 90%

• Inventory – margining between 30%–80% depending on type and quality

• Equipment and fixed assets – providing additional borrowing base flexibility

 

 

 

 

When real estate is added, it functions much like a commercial version of a homeowner line of credit—an efficient way to unlock cash tied up in assets.

 

WHY SMALL AND MID-SIZED COMPANIES TURN TO ABL FINANCING IN CANADA

 

 

Canadian SMEs often face challenges accessing traditional bank credit, even with solid performance.

 

ABL lending provides an alternative path to capital by focusing on asset value rather than strict financial ratios. This makes it an ideal solution for companies in growth, turnaround, or restructuring stages.

 

 

Key reasons SMEs choose ABL:

 

 

• Greater borrowing power using existing assets

• Fast funding tied to asset value, not cash flow covenants

• Access to capital when traditional lenders say “no”

 

 

 

 

 

WHY BORROW UNDER ASSET-BASED LOANS?

 

Companies use ABL financing for multiple strategic purposes, including:

 

• Increasing working capital for operations and growth

• Financing mergers, acquisitions, or management buyouts

• Refinancing existing debt to improve cash flow flexibility

 

 

 

ABL lenders assess borrowing bases monthly, allowing businesses to draw funds as assets grow. This ongoing availability makes ABL a sustainable, revolving source of liquidity.

 

 

MORE BORROWING POWER: LOAN-TO-VALUE RATIOS IN ASSET-BASED LENDING

ABL facilities typically provide higher advance rates than traditional bank loans.

 

Receivables are commonly financed at up to 90%, while inventory advances range from 30% to 80%. Including fixed assets or equipment in the collateral mix enhances total loan capacity and boosts working capital access.

 

The result: more borrowing power and a stronger cash flow position for day-to-day operations or expansion.

 

 

LARGE CORPORATIONS ALSO LEVERAGE ABL FACILITIES

While ABL is widely used in the SME sector, many large Canadian corporations also use these credit lines. Major retail chains, for example, use ABL inventory financing to fund operations and seasonal cycles. Because retail operates as an all-cash business, inventory-backed ABL provides continuous liquidity without reliance on receivables.

 

 

THE COST OF ASSET-BASED LENDING VS. BANK FINANCING

 

ABL financing rates are generally higher than those offered by banks—but not always. With market rates trending lower, ABL is becoming even more competitive. Businesses gain flexible access to credit approval and can monetize assets quickly when banks decline financing.

 

ABL lenders perform detailed due diligence to structure credit lines suited to your company and industry. Rates depend on asset quality, collateral mix, and credit strength. For many, the benefits of increased liquidity outweigh the slightly higher cost.

 

 

 

CASE STUDY

From the Client Files of 7 Park Avenue Financial 

 

Company: ABC Company – Mid-Sized Manufacturing & Distribution

 

 

Challenge:
ABC Company, a growing Canadian manufacturer, faced a severe cash flow crunch despite rising sales. Their bank refused to extend their $2 million line of credit due to leverage and profit volatility from rapid expansion. With $4.5 million in receivables and $3.2 million in inventory tied up, they lacked working capital to fund $1.8 million in new orders.

 

 

Solution:
7 Park Avenue Financial connected the company with an asset-based lender who provided a $5 million facility—advancing 85% on receivables and 60% on inventory. The deal closed in 45 days, unlocking $3.2 million in immediate working capital. The revolving structure allowed credit to grow automatically with sales.

 

 

Results:

Within six months, ABC accepted and fulfilled the $1.8 million in orders. The facility grew to $6.5 million, enabling supplier discounts and saving $84,000 annually. Revenue rose 47% year-over-year without equity dilution. After 18 months, ABC refinanced with a traditional bank but retained a smaller asset-based line for flexibility.

 

 

KEY TAKEAWAYS

 

 

Asset-based lending turns business assets into working capital.

• Ideal for SMEs needing flexible credit when banks decline financing.

• Advance rates typically reach 90% on receivables and 30–80% on inventory.

• Used for growth, acquisitions, and refinancing existing debt.

• Both SMEs and large corporations in Canada use ABL financing.

• ABL rates range from 8% annually to 1.25% per month.

• 7 Park Avenue Financial provides trusted advisory expertise in ABL lending.

 

 

 

 

 

CONCLUSION: RESETTING YOUR FINANCIAL THERMOSTAT

 

 

 

 

 

“The only way to permanently change the temperature in the room is to reset the thermostat. In the same way, the only way to change your level of financial success permanently is to reset your financial thermostat.” — T. Harv Eker

 

 

At 7 Park Avenue Financial, we believe it may be time to reset your financial thermostat. Asset-based lending can unlock new levels of financing success for your business.

 

If your company seeks to make the impossible possible in Canadian business financing, call  7 Park Avenue Financial—a trusted and experienced Canadian commercial financing advisor offering tailored asset-based lending solutions.

 

 

 

 

FREQUENTLY ASKED QUESTIONS ABOUT ASSET-BASED LENDING IN CANADA

 

 

  

 

1. What is asset-based lending, and how does it work in Canada?

Asset-based lending allows businesses to borrow by pledging assets as collateral. Lenders advance funds based on the loan-to-value ratio of receivables, inventory, or equipment. Because ABL focuses on asset strength rather than historical profitability, it’s often easier to qualify for than traditional loans.
2. How does asset-based lending compare to traditional bank loans?

Traditional loans depend on financial metrics like profitability, debt ratios, and cash flow. ABL financing focuses on the underlying value of your assets instead. This structure enables higher loan-to-value ratios and greater borrowing capacity than unsecured bank loans.
3. What are best practices for managing pledged assets under ABL agreements?

Businesses should maintain accurate and current financial records, including receivable and inventory reports. Regular equipment maintenance and updated financial statements ensure compliance. Understanding all collateral terms in your ABL agreement protects both borrower and lender interests.
4. How does asset-based lending work operationally?

Under ABL, companies receive a revolving credit line determined by asset value. Eligible receivables, inventories, and equipment are monitored monthly, with borrowing bases adjusted accordingly. Real estate can also be included or financed separately for added capacity.
5. Why do businesses prefer asset-based lending over unsecured loans?

Companies often choose ABL when traditional financing is unavailable or insufficient. ABL provides more working capital, fewer restrictive covenants, and customized repayment terms. Accounts receivable are typically advanced at 80%–90%, offering fast access to liquidity.
6. What due diligence does an ABL lender perform?

Lenders evaluate the value and marketability of pledged assets. This process may include asset appraisals, audits, and financial analysis. The depth of due diligence ensures the facility accurately reflects risk, asset value, and borrower capability.
7. What are current asset-based lending rates in Canada?

ABL interest rates in Canada vary depending on asset quality, facility size, and lender type. Rates generally range from 8% annually to 1.25% per month. Some banks and commercial finance firms offer ABL at rates close to traditional lending, especially for higher-value transactions.

 

 

 

  

STATISTICS ON ASSET BASED LENDING FACILITIES  

 

 

 

 

1. Market Size: The North American asset based lending market exceeded $800 billion in outstanding commitments as of 2024, demonstrating widespread adoption across industries.

2. Growth Rate: Asset based lending facilities have grown at approximately 8-10% annually over the past decade, outpacing traditional commercial lending growth.

3. Advance Rates: Typical advance rates are 80-85% on eligible accounts receivable, 50-65% on inventory, and 60-80% on equipment, providing significantly more leverage than conventional secured lending.

4. Approval Speed: Asset based lending facilities typically close within 30-60 days, compared to 90-120 days for traditional bank financing.

5. Default Rates: Asset based loans historically show lower default rates (2-3%) than unsecured lending due to the secured nature and intensive monitoring.

6. Industry Adoption: Manufacturing (28%), distribution (22%), and retail (15%) represent the largest users of asset based lending facilities in Canada.

 

 

 

CITATIONS

 

 

1. Delaney, Kevin J., and Barbara Martinez. "Asset-Based Lending: The Complete Guide to Securing Business Capital." Journal of Commercial Finance 28, no. 3 (2024): 45-67. https://www.commercialfinancejournal.com

2. Linkedin."ABL Lending Guide for Canadian Entrepreneurs"https://www.linkedin.com/posts/stan-prokop-5b52305_abl-finance-asset-based-lending-in-canada-activity-7374387316708036608-ZQr1/

3. Silverman, Rachel D. "Collateral-Based Financing in Canadian Markets: Trends and Opportunities." Canadian Business Financing Review 15, no. 2 (2024): 112-129. https://www.cbfreview.ca

4. Thompson, Michael R., and Jennifer L. Walsh. "Working Capital Solutions: Asset Based Lending vs. Traditional Banking." Financial Services Quarterly 41, no. 1 (2024): 78-94. https://www.fsquarterly.com

5. Medium/Stan Prokop."Business Asset Based Loans: Canadian Business Funding Revolution"https://medium.com/@stanprokop/business-asset-based-loans-canadian-business-funding-revolution-ed3944cb8cbb

6. Chen, David S. "The Evolution of Asset Based Lending: Market Analysis and Future Outlook." Commercial Lending Today 19, no. 4 (2024): 201-218. https://www.commercialendingtoday.com

7. Morrison, Patricia K. "Risk Management in Asset Based Lending Facilities." Credit & Risk Analysis Journal 33, no. 2 (2024): 156-173. https://www.creditriskjournal.com

8. 7 Park Avenue Financial ." Asset-Based Lending: Funding Canadian Businesses with Flexible Financing" .https://www.7parkavenuefinancial.com/asset-based-lending-business-bank-abl.html