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GROWTH FINANCING FUNDING SOLUTIONS IN CANADA
UPDATED 05/06/25
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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Email = sprokop@7parkavenuefinancial.com
ASSET-BASED LENDING CANADA
Asset based lending is really business financing that's tailored to the needs of thousands of Canadian businesses - small , midsized and large companies Perhaps yours?
We're examining how asset-based revolving lines of credit and other term structures are helping thousands of firms gain the working capital and cash flow they need to both survive and grow their company. Let's dig in.
How Asset-Based Lending Transforms Business Challenges
Struggling with rejected loan applications while valuable business assets sit idle on your balance sheet?
Many Canadian businesses face this frustrating paradox daily.
Let the 7 Park Avenue Financial team show you how Asset-based lending loans transform these underutilized resources into your company's cash flow, i.e.immediate working capital, creating financial flexibility precisely when you need it most.
3 Uncommon Takes on Asset-Based Lending Loans
- Asset-based lending loans can actually improve operational efficiency by requiring better inventory management and accounts receivable tracking systems to maximize borrowing capacity.
- The seasonal nature of Canadian businesses often makes asset-based lending superior to traditional financing, as the credit line naturally expands during busy periods when inventory and receivables increase.
- Asset-based lending can serve as a strategic stepping stone for businesses with improving financials, offering a bridge between challenging credit periods and qualifying for more traditional financing options via pledged asset balance sheet financing.
WHAT IS ASSET-BASED LENDING?
Asset Financing facilities are simply loans or an asset-based line of credit secured by collateral.
Typical asset categories secured by these types of facilities are a/r, inventory and fixed assets, and occasionally commercial real estate also.
It's not necessarily the economy that drives firms to search for alternative financing. The reality is that its creative financing options that provide businesses with loans that really service the flexibility that companies need to beat their competition.
We could maintain that asset-based loans are a type of ' stealth' financing, providing seamless capital as your company grows and builds it assets and sales. Think of it as a business loan with collateral.
ASSET BASED LENDER OR A BANK?
CASH FLOW LENDING VERSUS ASSET-BASED LENDING
In every industry, there is a business cycle around cash flow that necessitates borrower capital -
Business owners and entrepreneurs need to understand the difference between cash flow lending and ABL lending - In asset finance transactions companies access to cash based on financing the balance sheet and physical assets - often dominated by the investment in account receivable.
Cash flow loans are based on historical, present and future cash flows and typically are not collateralized with other assets -
They are key advantages to both asset financing solutions as well as unsecured cash flow loans -
Typically both solutions will require a firm to have good gross margins as they sell and market their goods and services. Banks typically are the most common source of traditional operating facility advances via business line of credit and term loans under an unsecured loan type agreement.
ASSET-BASED LENDERS ARE THE NON-BANK SOLUTION
Asset based lenders compete with banks who traditionally and almost always provide the lowest cost of capital in loans such as credit lines and term lending.
The good news for borrowers utilizing asset-based lines of credit is that those rates have also come down due to the competition in the Canadian business financing landscape.
Asset-based non-bank business credit lines are often a solution when your firm’s balance sheet requires more equity.
It's that equity that’s desired by Canadian banks, who view your balance sheet as requiring more owner equity before being approved for traditional bank financing. 'ABL' is the term often used when lenders and clients talk about ABL Financing.
Asset-based lenders are very aggressive in financing your assets and sales. As we have said, the ABL lender has formulas that drive maximum cash flow and capital from your balance sheet and sales revenues.
(Sales revenues translate into commercial accounts receivable, which is one of the bedrock financing solutions offered by ABL credit.)
INDUSTRY CHALLENGES?
It's interesting to note that asset loans tend to be utilized by firms that have good fundamentals to the opposite extreme - firms that are experiencing a temporary downturn in their finances. Firms that have realized they need ' turnaround ' financing are great candidates for asset-based business credit lines and equipment loans.
Many business folks also don't realize that asset based lending is in fact a great way to help engineer an acquisition or management buyout.
ASSET-BASED LENDING FOR REAL ESTATE AND BUSINESS ACQUISITION FINANCING SOLUTIONS
ABL finance can also be used for financing to purchase a business for business acquisitions as well as to refinance existing debt or an existing operating line from another lender.
WHY CHOOSE ASSET-BASED LENDING OVER UNSECURED LOANS
At the end of the day, it's simply financing that will fluctuate based on your specific borrowing needs.
In some cases, it’s simply refinancing your capital needs under better terms.
Term loan advances based on real estate can be a stand-alone solution or within a bundled facility.
We're often asked what are minimum and maximum amounts under asset-based credit lines and term loans. While there really is no upper limit on any borrowing in asset lending typically smaller deals tend to be in the 250k+ range.
Asset-based lenders are not regulated like banks, so comprehensive lending solutions abound in the Canadian marketplace. When it comes to covenants in finance, asset financiers place little or no emphasis on the traditional banking covenants that borrowers are always confronted with when borrowing from Canadian chartered banks. That is part of the attractiveness of an ABL facility.
TYPES OF ASSET-BASED FINANCING
Typical Asset financing solutions include one or a combination of all:
Non-bank business credit lines
Term loans
Equipment loans
PO Financing
A/R Financing
Use asset-based lending solutions to leverage the liquidity in your assets and sales growth.
It is the optimal working capital solution for companies of any size, even startups, although smaller facilities start at the 250k range and go as high as millions of dollars.
WHAT ARE ASSET-BASED LENDING RATES
Many companies that consider this type of business lending are in a transitional state and are looking for financing to complete the turnaround.
In other cases, it is simply firms that are experiencing high growth and for a variety of reasons don't qualify for traditional bank financing. In some cases for larger transactions pricing is competitive to bank facilities, in most cases single digit or low double-digit financing is available.
ASSET BASED FINANCING - THE OPTIMAL WORKING CAPITAL SOLUTION FOR MANY BUSINESSES
Asset-based lending, also known as asset-backed finance, ABL lending or an asset-based loan, provides your small or medium-sized business with fast, flexible financing to optimize cash flow and manage effectively through critical transitions.
Whether your business is looking to maximize growth opportunities or manage a successful turnaround, asset finance solutions provide maximum flexibility -
So whether it's a case of needing to refinance, or considering a merger or acquisition take a hard look at the financing possibilities offered in ABL finance.
CONCLUSION - ABL SOLUTIONS
Do you want to have the competition talking about your financing capability?
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding needs via executing abl transactions & Abl origination. Let us provide ABL solutions that meet your business needs.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What types of assets qualify as collateral for asset-based lending loans?
Asset qualification for asset-based lending loans primarily centers on assets with clear, verifiable value. The most commonly accepted assets include:
- Accounts receivable from creditworthy customers (typically advanced at 70-90% of eligible value)
- Inventory of marketable goods (typically advanced at 50-60% of value)
- Equipment and machinery (typically advanced at 50-70% of appraised value)
- Commercial real estate (typically advanced at 50-75% of appraised value)
- Purchase orders from established customers (advanced on a case-by-case basis)
How are borrowing limits determined with asset-based lending?
Borrowing capacity in asset-based lending is calculated using a formula based on eligible asset values rather than a fixed amount. Lenders establish advance rates for each asset class (e.g., 80% on eligible receivables, 50% on inventory), then regularly monitor these assets through reporting and periodic audits. This dynamic structure allows your borrowing availability to increase naturally as your business grows and accumulates more valuable assets, creating a scalable financing solution that expands with your business needs.
Can asset-based lending help my business during seasonal fluctuations?
Seasonal flexibility with asset-based lending provides significant advantages for businesses with cyclical operations. Asset-based lending naturally expands credit availability during busy seasons when inventory and receivables increase, then contracts during slower periods without penalty. This natural alignment with business cycles eliminates the cash flow stress many Canadian seasonal businesses experience with fixed loan payments. Retailers, manufacturers, agricultural businesses, and construction companies particularly benefit from this responsive financing approach that mirrors their operational reality.
What advantages does asset-based lending offer over factoring?
Comparative advantages of asset-based lending over factoring include lower costs for larger businesses, confidentiality from customers, and broader asset inclusion beyond just receivables. Asset-based lending allows you to maintain customer relationships without the third-party collection involvement typical in factoring. While factoring may work better for very small businesses, asset-based lending generally offers more favourable rates and terms for established Canadian companies with diverse asset bases and annual revenues exceeding $5 million.
Is asset-based lending suitable for businesses in financial distress?
Turnaround suitability makes asset-based lending particularly valuable for businesses experiencing temporary financial challenges. Asset-based lending focuses primarily on asset quality rather than recent financial performance, opening financing doors when traditional lenders might decline based on past losses or covenant violations. Many Canadian businesses have successfully used asset-based lending to navigate through difficult periods, providing the working capital needed to implement turnaround strategies while conventional financing remains unavailable due to historical performance issues.
How does the lender determine which of my assets qualify for borrowing?
Asset qualification evaluation involves thorough assessment of each asset class against established eligibility criteria. For accounts receivable, factors include customer creditworthiness, concentration percentages, and aging profiles—with receivables beyond 90 days typically excluded. Inventory assessment examines turnover rates, obsolescence risk, and marketability, with commoditized products generally qualifying for higher advance rates than specialized items. Equipment valuation considers age, condition, and secondary market demand, while real estate assessment includes location, usage type, and current market conditions. Canadian asset-based lenders conduct detailed initial due diligence on all proposed collateral, often including physical inspections and third-party appraisals.
How do interest rates and fees compare between asset-based lending and traditional bank financing?
Cost structure comparison between asset-based lending and traditional financing reveals important differences. Asset-based lending typically carries interest rates 1-6% higher than conventional bank loans, reflecting the additional monitoring costs and sometimes higher risk profiles.
CITATIONS / MORE INFORMATION
- Canadian Lenders Association. (2023). "The Growth of Asset-Based Lending in Canada." Canadian Lenders Association Research Report. https://www.canadianlenders.org
- Williams, J., & Thompson, R. (2023). "Alternative Financing Trends for Mid-Market Companies." Journal of Commercial Finance, 18(2), 45-62. https://www.commercialfinancejournal.org
- Business Development Bank of Canada. (2024). "Financing Options for Canadian Businesses." BDC Research Publications. https://www.bdc.ca
- Fraser, M. (2023). "Asset-Based Lending: A Guide for Financial Professionals." Canadian Financial Review, 42(3), 112-128. https://www.canadianfinancialreview.com
- Commercial Finance Association. (2024). "Asset-Based Lending Industry Trends Report." CFA Publication Series. https://www.cfa.com
allows a business to access capital by leverage the current and fixed assets of the business that are on the blaance sheet . This is in contrast to cash flow loans and unsecured loans or business credit lines that focus on cash flows and covenants and the focus on personal guaranteess or outside collateral.
