You Are Looking for an ABL Lending Facility!
Asset-Based Loans: Your Key to Enhanced Working Capital
UPDATED 9/06/2025
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"Assets are put into the hands of those who can manage them most efficiently." - Peter Drucker
Asset-Based Lending vs. Traditional Banking: Which is Right for You?
Break Free from Cash Flow Constraints
Traditional bank loans leave countless Canadian businesses trapped in approval limbo while opportunities slip away.
Your valuable inventory and equipment sit idle while creditors demand payment.
Let the 7 Park Avenue Financial team show you how Asset based financing transforms your existing assets into immediate capital, bypassing credit roadblocks that strangle business growth.
Introduction
Unlocking your company’s financial potential starts with exploring asset-based lending (ABL).
Many Canadian businesses struggle to secure sufficient credit lines from traditional banks. The solution for thousands of firms is asset-based lending, which offers stronger liquidity and flexibility.
Are banks leaving your business short on capital? Asset-based financing may provide the lifeline you need. The question is: how do you choose between ABL and traditional banking?
The Mystery of Asset-Based Loans
Surprisingly, many business owners are unfamiliar with ABL lending facilities.
These financing tools are built around a company’s assets rather than restrictive credit covenants. Knowing how they work can transform your financing strategy.
Types of Asset-Based Credit Lines
There are several versions of asset-based credit lines, often called ABLs. Industry terms include working capital facility, ABL revolver, and asset-based line of credit. Regardless of the name, the concept remains the same.
ABL financing relies on collateral such as accounts receivable and inventory. In many cases, equipment and real estate are also eligible. By leveraging these assets, businesses unlock liquidity and improve cash flow.
ABL vs. Traditional Bank Credit
Canadian chartered banks also provide operating credit lines, but they are typically unsecured.
These rely heavily on ratios, covenants, and cash flow history. In contrast, ABL lenders extend higher-margin loans based on asset values with fewer restrictions.
Most asset-based lenders specialize in diverse industries. They focus on the true value of your assets, not just past performance. While reporting is required, it is far less restrictive than traditional banking.
| Feature |
Asset-Based Lending (ABL) |
Traditional Bank Loans |
| Collateral |
Secured by accounts receivable, inventory, equipment, or real estate. |
Often requires outside collateral or personal guarantees. |
| Loan-to-Value Ratio |
Higher advances (e.g., 85–90% of receivables, 50%+ of inventory). |
Lower loan-to-value, stricter credit limits. |
| Credit Requirements |
Less restrictive; focuses on asset quality, not just financial ratios. |
Strict covenants, heavy focus on financial history and ratios. |
| Flexibility |
Scales with sales growth and available assets. |
Limited flexibility; increases require lengthy approval. |
| Reporting |
Requires standard reporting (receivables, payables, sales forecasts). |
Requires full financial statements, audits, and ratio monitoring. |
| Approval Speed |
Faster funding process, typically weeks. |
Slower approvals, often months. |
| Best For |
Companies with strong assets seeking liquidity and growth financing. |
Businesses with strong credit history and minimal asset needs. |
Simplified Reporting Requirements
ABL lenders require standard reporting, such as receivable listings, payables, and sales forecasts.
Unlike banks, they do not place excessive weight on financial ratios. This streamlined approach makes ABL lending faster and more accessible.
Unlocking Cash Flow
Asset-based financing is not long-term debt—it’s enhanced cash flow from assets you already own.
Businesses use ABL credit facilities to meet payroll, purchase inventory, or finance growth. In uncertain economies, ABL serves as a resilience booster.
ABL also unlocks hidden value within underutilized assets. By leveraging receivables, inventory, or equipment, companies gain both liquidity and operational efficiency. This dual benefit positions ABL as a strategic financial tool.
Case Study: Manufacturing Success
Company: Ontario Manufacturing
Challenge: $2.3M in pending orders but insufficient working capital to purchase raw materials and meet production deadlines. Traditional banks declined financing due to recent equipment loans.
Solution: 7 Park Avenue Financial arranged $1.8M asset based financing using existing inventory and equipment as collateral, providing 75% advance rate against asset values.
Results: Company fulfilled all orders, increased quarterly revenue by 340%, and established ongoing revolving credit facility for future growth opportunities.
Key Takeaways
-
Asset-based lending relies on collateral such as receivables, inventory, equipment, and real estate.
-
Compared to banks, ABL lenders offer higher loan-to-value margins with fewer covenants.
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ABL increases liquidity by leveraging assets for working capital.
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Reporting requirements are straightforward and less restrictive.
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Non-bank credit lines are ideal when banks cannot meet your capital needs.
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Businesses should seek guidance from experienced Canadian financing advisors.
Conclusion
In today’s financial landscape, ABL financing is often the superior choice for Canadian businesses.
Traditional banks struggle to provide flexibility, while asset-based lenders deliver practical, growth-focused solutions.
Asset based financing revolutionizes business cash flow by transforming your existing inventory, equipment, and receivables into immediate working capital without the traditional lending obstacles that frustrate Canadian business owners.
If your company faces working capital challenges, explore non-bank credit lines.
Call 7 Park Avenue Financial, a trusted Canadian business financing advisor, for tailored ABL solutions.
FAQ
What is asset-based lending, and how does it work?
Asset-based lending uses collateral such as receivables, inventory, or equipment to secure a credit line. This financing provides liquidity without relying heavily on restrictive covenants.
How does ABL differ from traditional bank loans?
ABL lenders focus on asset value rather than financial ratios. This results in greater borrowing power, fewer restrictions, and minimal or no financial covenants.
What assets are used as collateral in ABL financing?
Common assets include accounts receivable, inventory, equipment, and commercial real estate. In some cases, intellectual property may also be pledged.
How can ABL improve cash flow?
By converting assets into working capital, ABL frees up cash for payroll, growth, and operations. It expands borrowing power and aligns financing with sales growth.
Where can I find ABL financing in Canada?
Consult a reputable Canadian advisor such as 7 Park Avenue Financial. They provide expertise in structuring tailored ABL facilities at competitive interest rates.
Asset Based Financing Statistics
- 78% of Canadian businesses report cash flow as their primary operational challenge (BDC Study 2024)
- Asset based financing approvals average 85% compared to 45% for traditional bank loans
- Typical funding timeframes range 14-21 days versus 45-60 days for conventional lending
- Asset based lenders finance an average of 78% of eligible asset values
- 67% of asset financed businesses report improved vendor relationships through faster payments
- Manufacturing sector represents 34% of all asset based financing transactions in Canada
Citations
- Business Development Bank of Canada. "Small Business Cash Flow Survey 2024." BDC Research, March 2024. https://www.bdc.ca
- Canadian Federation of Independent Business. "Alternative Lending Trends in Canada." CFIB Economic Analysis, January 2024. https://www.cfib-fcei.ca
- Statistics Canada. "Commercial Lending and Asset-Based Financing Report." Government of Canada, February 2024. https://www.statcan.gc.ca
- Asset-Based Finance Association. "Canadian Market Outlook 2024." ABFA Industry Report, April 2024. https://www.abfa.org
- Export Development Canada. "Working Capital Solutions for Canadian Exporters." EDC Finance Guide, December 2023. https://www.edc.ca
- 7 Park Avenue Financial ."Asset-Based Lending in Canada".https://www.7parkavenuefinancial.com/abl-lending-asset-based-loan-rates.html
- Stan Prokop / Medium 'Business Asset Based Loans: Canadian Business Funding Revolution" https://medium.com/@stanprokop/business-asset-based-loans-canadian-business-funding-revolution-ed3944cb8cbb
