YOUR COMPANY IS LOOKING FOR ASSET BASED LINES OF CREDIT!
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CONTACT US - OUR EXPERTISE = YOUR RESULTS!!
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
"Assets put money in your pocket whether you work or not." - Robert Kiyosaki (adapted for business context)
Table of Contents
Business Asset-Based Loan Overview
When Asset-Based Lending Makes Sense
Asset-Based Lending Versus Bank Financing in Canada
How Asset-Based Credit Lines Are Margined
How ABL Lenders Work with Business Bank Accounts
What Assets Can Be Financed Under an ABL Facility
Cost of Asset-Based Lending
Conclusion
Asset-based lending (ABL) can solve cash-flow problems when a traditional revolving line of credit no longer works. It is commonly used when businesses face financial stress, rapid growth, acquisitions, or turnaround situations.
ABL asset-based finance provides a flexible revolving credit facility secured by business assets. As assets grow, available funding typically increases.
AN UNCOMMON TAKE ON BUSINESS ASSET BASED LOANS
Combining multiple asset classes creates more credit than using them separately. A lender might offer 75% on receivables or 60% on equipment individually. But when you pledge both simultaneously, some lenders will advance 80% on receivables and 65% on equipment because the cross-collateralization reduces their risk. Your borrowing base jumps 5-10% simply by bundling.
WHEN DOES ASSET-BASED LENDING MAKE SENSE?
ABL financing is often used when traditional bank lending becomes restrictive. Common early warning signs include:
Declining profitability despite strong sales
Rapid growth creating working-capital pressure
Recent acquisitions or ownership changes
Turnaround or restructuring situations
Limited access to bank credit due to past financial challenges
Asset-based lenders focus on asset value rather than historical financial ratios.
ASSET-BASED LENDING Versus BANK FINANCING IN CANADA
Both bank credit lines and ABL facilities aim to fund working capital. The difference lies in how credit availability is calculated.
Banks rely heavily on cash flow, profitability, and covenants. ABL lenders rely on the value of pledged assets.
Key differences include:
Banks impose fixed credit limits
ABL lines scale with asset growth
Banks emphasize earnings and ratios
ABL emphasizes collateral value
HOW ARE ASSET-BASED CREDIT LINES MARGINED?
Accounts receivable are the foundation of most ABL facilities. Unlike bank lines, ABL credit is not capped.
As sales grow, borrowing capacity typically increases. Margining rates are higher than traditional bank facilities.
Typical margining comparisons:
ABL receivables advance rate: up to 90%
Bank receivables advance rate: approximately 75%
Although ABL reporting is more frequent, the trade-off is greater access to capital.
HOW ABL LENDERS MANAGE BUSINESS BANK RELATIONSHIPS
Asset-based lenders are often non-bank institutions. Some are affiliated with banks, but many operate independently.
ABL facilities typically use a blocked account structure. Customer payments flow into a controlled account, while operating expenses are funded separately.
How it works:
Loan advances fund the operating account
Customer receipts flow into a blocked account
Both accounts fluctuate daily
This structure ensures lender security while maintaining business liquidity.
WHAT ASSETS CAN BE FINANCED UNDER AN ABL FACILITY?
ABL financing extends beyond receivables. Multiple asset classes can be combined into one revolving credit line.
Eligible assets often include:
Accounts receivable
Inventory
Equipment and machinery
Commercial real estate (in some structures)
Higher advance rates across asset classes increase total borrowing capacity.
WHY BANK REQUIREMENTS DO NOT APPLY TO ABL
Traditional banks focus on cash flow and profitability. These metrics can be challenging during growth or transition periods.
ABL lenders focus on asset quality and liquidity. As a result, many traditional bank covenants do not apply.
Typically not required in ABL financing:
Debt-to-equity ratios
Tangible net worth tests
Cash-flow coverage ratios
This makes ABL well-suited for complex business situations.
COST OF ASSET-BASED LENDING
Asset-based loans may cost more than bank credit. In some cases, they may cost less depending on structure and utilization.
ABL also requires more frequent reporting. However, the benefits often outweigh the added cost.
ABL is commonly used to support:
Growth financing
Business turnarounds
Acquisitions
Liquidity stabilization
Proper use of funds can offset higher pricing through improved profitability.
Asset-Based Business Loan Case Study: ABC Manufacturing
Company
ABC Manufacturing is a Southern Ontario industrial parts manufacturer with $12 million in annual revenue.
The Challenge
ABC Manufacturing faced a working-capital shortfall that limited growth. Their bank provided $800,000 against $1.6 million in receivables and excluded $2.4 million in inventory as collateral. A $3 million automotive contract could not be funded due to a 60-day production cycle and covenant restrictions tied to debt-to-equity ratios.
The Asset-Based Loan Solution
7 Park Avenue Financial structured a $2.8 million asset-based loan facility secured by receivables, inventory, and equipment. The facility advanced:
80% of receivables ($1.28 million)
60% of inventory ($1.44 million)
Total availability reached $2.72 million, delivering 240% more capital than the bank line. Funding closed in 22 days, meeting production deadlines.
The Results
ABC Manufacturing completed the $3 million contract, generating $740,000 in gross margin. The revolving facility supported ongoing production cycles as receivables were collected and re-advanced. Within 18 months, revenue grew to $18.5 million. The company later refinanced with a traditional bank after strengthening profitability and equity.
Key Takeaways
Asset-based loans provide flexible revolving credit secured by assets
ABL facilities grow as receivables and inventory increase
Advance rates are higher than traditional bank lines
Cash-flow covenants are typically not required
ABL is ideal for growth, acquisitions, and turnarounds
Reporting requirements are higher but manageable
CONCLUSION
Need Working Capital Your Assets Can Unlock?
7 Park Avenue Financial specializes in business asset based loans for Canadian companies.
Asset-based loans represent a modern alternative to traditional business credit in Canada. They offer flexibility, scalability, and higher access to capital.
Call 7 Park Avenue Financial, an experienced Canadian business financing advisor to determine whether asset-based lending fits your funding strategy.
FAQ/FREQUENTLY ASKED QUESTIONS
Who qualifies for a business asset-based loan in Canada?
Businesses qualify based on asset quality, not credit scores. Companies with receivables, inventory, equipment, or real estate can qualify even with losses or weak ratios. Manufacturing, distribution, retail, and transportation firms are common users.
What assets can secure a business asset-based loan?
Eligible collateral typically includes accounts receivable, inventory, equipment, vehicles, and real estate. Receivables must be from creditworthy customers under 90 days. Intangibles like goodwill are usually excluded.
When should a business consider asset-based lending?
Asset-based lending is ideal during rapid growth, acquisitions, seasonal cycles, bank covenant breaches, or turnarounds. It works well when working-capital needs scale faster than bank credit limits.
Where do Canadian businesses find asset-based lenders?
Sources include chartered bank ABL divisions, independent finance companies, and alternative lenders. Large banks focus on $5M+ facilities, while mid-market lenders serve $250K–$5M deals. Most operate through commercial finance teams or brokers.
Why choose asset-based loans over traditional lines of credit?
ABL offers higher advance rates, faster approvals, and fewer cash-flow covenants. Borrowing capacity grows automatically as receivables and inventory increase.
How much can a business borrow with asset-based lending?
Loan sizes typically range from $250,000 to $50 million. Advance rates average:
75–85% of receivables
50–65% of inventory
60–80% of equipment
Availability fluctuates with asset balances.
What does a business asset-based loan cost?
Total costs usually range 8–14% annually, including interest, legal fees, audits, and monitoring. ABL costs more than bank credit but provides access when banks cannot.
How fast can a business get asset-based financing?
Most companies fund within 2–4 weeks if records are clean. Complex or distressed situations may take 4–8 weeks.
Which industries benefit most from asset-based lending?
Industries with tangible assets perform best, including:
Manufacturing
Wholesale distribution
Retail
Transportation and logistics
Contract services
Asset-light sectors face more challenges.
Can startups qualify for asset-based loans?
Yes, if they own tangible assets. Startups face higher equity requirements, stricter monitoring, and higher pricing. Most lenders prefer 12–24 months of operating history.
How does asset-based lending improve cash flow?
ABL converts receivables into cash within days instead of waiting 30–90 days. This accelerates inventory purchases, payroll, and growth.
How does ABL support growth?
Borrowing capacity scales automatically with sales. No renegotiation or credit increase requests are required.
How does ABL help businesses with credit challenges?
Lenders underwrite collateral value, not credit scores or profitability. Past financial issues are less relevant.
Why does ABL provide more capital than banks?
Higher advance rates are possible due to ongoing collateral monitoring and tighter controls.
How does ABL support acquisitions?
Lenders finance the target company’s receivables and inventory immediately after closing, reducing equity requirements.
What’s the difference between asset-based loans and traditional loans?
ABL is a revolving facility tied to assets, not fixed limits or cash-flow covenants. Availability changes with collateral levels.
Do I lose control of my business?
No. Owners retain full control. Lenders require reporting but do not take equity or management roles.
Is ABL only for distressed companies?
No. Many profitable, growing businesses use ABL for flexibility and higher capital access.
What happens if collateral values decline?
Borrowing availability decreases until assets recover. Availability rises again as receivables are collected or inventory turns.
How long do asset-based loans last?
Terms are usually 1–3 years, with many businesses renewing for 5–10+ years as permanent working capital.
What is a borrowing base?
The borrowing base is the maximum available credit, calculated by applying advance rates to eligible assets minus reserves.
What is a collateral audit?
Lenders periodically verify receivables, inventory, and equipment through on-site exams. Audits ensure asset accuracy.
Why are personal guarantees required?
Guarantees protect lenders from collateral shortfalls and encourage responsible asset management. Full removals are rare.
STATISTICS - BUSINESS ASSET BASED LOANS
Asset based lending facilities in North America exceed $800 billion in total commitments, with Canadian facilities representing approximately $80-100 billion of that market
Approximately 25% of middle-market companies (revenues $10M-$1B) use some form of asset based lending as their primary working capital source
Asset based lenders typically advance 75-85% against eligible accounts receivable, compared to 50-60% for traditional bank lines of credit
The asset based lending market grew at 8-10% annually from 2015-2024, outpacing traditional commercial lending growth
Field examination costs average $5,000-$7,000 per audit, with most facilities requiring 2-4 examinations annually
Default rates on asset based loans run 2-3% annually, significantly lower than unsecured business lending (6-8%)
Average asset based loan facility size in Canada ranges from $500,000 to $15 million for middle-market companies
Approximately 60% of asset based loan users are manufacturers and distributors, with retail representing another 20%
CITATIONS
Deloitte Canada. "Asset-Based Lending: A Primer for Canadian Businesses." Deloitte Insights, 2023. https://www2.deloitte.com
Commercial Finance Association. "The Asset-Based Lending Market: Growth and Trends." CFA Industry Reports, 2024. https://www.cfa.com
Medium/Stan Prokop/7 Park Avenue Financial ."Asset Based Loan Facility: How Canadian Businesses Unlock Hidden Capital" .https://medium.com/@stanprokop/asset-based-loan-facility-how-canadian-businesses-unlock-hidden-capital-a6e775de864e
Business Development Bank of Canada. "Working Capital Financing Options for Canadian SMEs." BDC Resources, 2023. https://www.bdc.ca
PwC Canada. "Asset-Based Lending in the Middle Market." PwC Financial Services, 2024. https://www.pwc.com/ca
Linkedin."Asset Based Loans: The Smart Alternative to Traditional Banking" .https://lnkd.in/gqX-rwwa
Export Development Canada. "Trade Finance and Asset-Based Lending Solutions." EDC Reports, 2023. https://www.edc.ca
KPMG Canada. "Manufacturing Sector Financing Trends." KPMG Enterprise, 2024. https://home.kpmg/ca
MNP LLP. "Cash Flow Management Through Asset-Based Lending." MNP Insights, 2023. https://www.mnp.ca
7 Park Avenue Financial ." Asset Based Lending Facility: Unlock Capital From Your Balance Sheet Assets" . https://www.7parkavenuefinancial.com/abl-lending-asset-based-loan-rates.html
