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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
"Assets are not so much what you own but what you do with what you own." - J. Paul Getty
ASSET-BASED LENDER FINANCING SOLUTIONS
Table of Contents
What Is Asset-Based Lending?
Transform Business Assets into Growth Capital
The Fundamentals of Asset-Based Lending
The Role of Assets, Accounts Receivable, and Collateral
Key ABL Credit Offerings
Qualifying for Asset-Based Lending
Why Businesses Choose Asset-Based Lending
Key Decision-Making Factors
Funding Timelines
What Assets Qualify?
Typical Lending Amounts
Asset-Based Lending Applications
Accounts Receivable Financing
Cash Flow Management with ABL
Key Takeaways
Conclusion
FAQs
What Is Asset-Based Lending?
Asset-based lending (ABL) uses a company’s assets as collateral to secure financing.
It is ideal for businesses with strong asset bases but inconsistent or constrained cash flow.
Lenders focus on asset value rather than traditional credit metrics.
Asset Based Lending: Escape Financing Frustrations
When the Bank Says No, Your Business Doesn't Have to Stop
PROBLEM: Your business has real assets — invoices waiting to be paid, inventory on shelves, equipment on the floor — but your bank keeps tightening your credit or denying your facility increase.
Every month of inadequate financing costs you: lost supplier discounts, missed growth contracts, strained supplier relationships, and the slow bleed of using expensive short-term debt as a patch. Businesses in this position often spiral — not from poor operations, but from poor capital structure.
SOLUTION: Let the 7 Park Avenue Financial team show you how An asset based lender structures a credit facility directly against the value of your assets. As your receivables and inventory grow, so does your available capital — automatically.
Transform Business Assets into Growth Capital
Banks often decline Canadian businesses despite strong balance sheets.
This creates funding gaps that limit growth and strain operations.
Asset-based lenders bridge this gap by monetizing existing assets through asset based lending solutions that leverage receivables, inventory, and real estate.
Key advantages:
Unlock hidden working capital
Reduce reliance on bank approvals
Align financing with operational scale
3 Uncommon Takes on ABL :
ABL lenders often act as informal financial advisors
Faster payments can strengthen supplier relationships
Financing grows dynamically with asset levels
The Fundamentals of Asset-Based Lending
Business financing in Canada comes down to strategic choices.
ABL is commonly used by emerging, growth-stage, and mid-market firms that benefit from flexible Canadian asset-based lending solutions for growth and restructuring.
Facilities are secured against receivables, inventory, equipment, or real estate.
The Role of Assets, Accounts Receivable, and Collateral
Assets appear on the balance sheet, but collateral value drives lending capacity.
Lenders assess liquidation value, not just book value.
Negative pledge clauses are often required to protect lender priority.
Important note:
ABL typically carries higher rates due to increased risk exposure.
Key ABL Credit Offerings
Asset-based lenders provide a range of structured asset-based lending and revolving credit solutions:
Accounts Receivable Financing (Factoring)
Up to ~90% advance rates
Based on invoice quality and debtor strength
Inventory Financing
Purchase Order (P.O.) Financing
Sale-Leasebacks / Equipment Financing
Qualifying for Asset-Based Lending
Typical deal sizes range from $250,000 to $50M+ for asset-based lending loans and asset finance revolvers in Canada.
Smaller transactions are possible with specialized lenders.
Basic requirements include:
Financial statements
Accounts receivable aging
Inventory reports
Optional: business plan and cash flow forecast
Why Businesses Choose Asset-Based Lending
ABL is often used to solve short- to intermediate-term cash flow constraints by providing flexible Canadian ABL financing for cash flow and growth.
It supports contract fulfillment, growth, and acquisitions.
It is also effective during restructuring or turnaround situations.
Key Decision-Making Factors
Lenders evaluate several core variables:
Overall cash flow position
Existing debt structure
Quality and mix of assets
Industry risk profile
How Quickly Can I Access Funding?
Asset-based lending typically funds within 2–3 weeks after:
Application submission
Asset verification
Documentation completion
What Assets Qualify for Asset-Based Lending?
Eligible collateral includes:
Accounts receivable
Inventory
Equipment
Real estate
Purchase orders
Intellectual property
What Lending Amounts Are Available?
Typical ranges:
Minimum: $250,000
Maximum: $50M+
Funding levels depend on:
Asset quality
Advance rates
Collateral value
Asset-Based Lending Applications
Primary Uses
Growth and expansion financing
Working capital support
Operational restructuring
Debt refinancing
Ideal Industries
Manufacturing
Retail
Construction
Distribution
Key Advantages
Accessible despite weak cash flow
Leverages existing assets
Flexible structure
Scales with business growth
Accounts Receivable Financing
Accounts receivable financing converts unpaid invoices into immediate cash.
It improves liquidity without waiting for customer payments.
This structure stabilizes cash flow and supports ongoing operations, and many asset-based lending companies in Canada tailor these facilities to SMEs and high-growth firms.
Cash Flow Management with Asset-Based Lending
ABL converts assets into usable working capital.
It supports payroll, supplier payments, and inventory purchases.
It also improves liquidity and operational continuity.
What Does “Outgrowing an ABL Facility” Mean?
ABL is designed for:
Companies with rapid growth
Tight working capital cycles
Limited historical profitability
Heavy reliance on accounts receivable and inventory
You’ve likely outgrown ABL when:
EBITDA is stable and predictable
Leverage ratios improve
Working capital is no longer under constant stress
The business generates excess cash flow
At this point, ABL becomes:
More expensive than necessary
Operationally restrictive (reporting, borrowing base certificates)
Less efficient vs. conventional bank structures
Why Transition to Bank Financing?
1. Lower Cost of Capital
ABL pricing (often Prime + 2–5%) can be replaced with:
Bank term debt: Prime + 0.5–2.0%
Revolving LOC: tighter spreads
2. Reduced Monitoring & Reporting
Case Study: Asset-Based Lending for a Food Distributor
Company
ABC Company — Ontario-based food and beverage distributor
Challenge
ABC Company secured two major grocery contracts, increasing projected revenue by 40%.
Its bank line was capped at $800K, while the contracts required $2.1M in monthly working capital.
The bank review timeline could not meet the urgency of the opportunity.
Solution
A $2.5M asset-based lending facility with a non-bank lender.
85% advance on accounts receivable
55% advance on inventory
Facility closed within 30 days
Confidential structure preserved customer relationships
Results
Borrowing capacity scaled from $800K to $2.1M within 60 days
Contracts executed without disruption
Supplier terms improved through consistent payments
Revenue increased by 38% year-over-year
Facility later refinanced into a traditional bank line
KEY TAKEAWAYS
Asset-based lending uses collateral, not credit score, as the primary driver
Advance rates determine borrowing capacity
Reporting requirements ensure transparency
ABL supports working capital optimization
Facilities adjust to seasonal or growth fluctuations
Inventory-heavy businesses benefit significantly
Conclusion: Asset-Based Lending Works
Asset-based lending is a practical solution for businesses facing liquidity constraints.
It provides flexible, scalable capital aligned with asset value.
7 Park Avenue Financial offers structured ABL solutions tailored to Canadian businesses.
FAQs: FREQUENTLY ASKED QUESTIONS - Asset-Based Lending (Canada)
What is an asset-based lender, and how is it different from a bank?
An asset-based lender provides financing secured by assets like receivables and inventory.
Unlike banks, funding is based on asset value—not cash flow or credit score.
Borrowing capacity increases as your assets grow, making ABL ideal for expansion or seasonal needs
.
Who qualifies for asset-based lending in Canada?
ABL suits established Canadian businesses with strong assets and ongoing operations.
Typical requirements include:
Commercial accounts receivable
Liquid inventory
Revenue starting around $500K+
Startups rarely qualify due to limited asset bases.
What assets can be used as collateral?
Asset-based lenders typically accept:
Accounts receivable (75%–90% advance)
Inventory (40%–65% advance)
Equipment (appraised value)
Commercial real estate (in some cases)
Eligibility depends on asset quality and liquidity.
How much does asset-based lending cost compared to a bank?
ABL generally costs more than bank financing but offers greater access to capital.
Bank lines: ~Prime + 1%–2.5%
ABL facilities: ~Prime + 2%–4% + fees
For many businesses, ABL is more cost-effective than underfunding or missed growth opportunities.
What is the difference between ABL and invoice factoring?
Factoring: You sell invoices; the lender collects payments
ABL: You borrow against receivables and retain customer control
ABL often includes inventory and typically has lower costs at scale.
How long does it take to set up an ABL facility?
Most facilities close within 4–8 weeks, depending on complexity.
Typical steps include:
Structuring and proposal
Legal documentation
Asset audit (field exam)
Bridge financing may be used for urgent needs.
What is a borrowing base certificate?
A borrowing base certificate reports eligible receivables and inventory.
It determines how much funding is available at any time.
It is usually submitted weekly or monthly.
Can businesses with weak credit or losses qualify?
Yes. ABL focuses on asset quality rather than credit history.
Lenders prioritize:
Collectible receivables
Liquid inventory
Business viability
Companies with recent losses can still qualify if assets are strong.
Key Statistics: Asset Based Lending
The U.S. ABL market exceeded $800 billion in outstanding credit commitments (Secured Finance Network, 2023)
Largest reference market; Canada tracks directionally
Approximately 60% of Canadian SMEs report access to financing as a significant operational challenge (CFIB)
Illustrates the addressable market for ABL solutions
ABL advance rates on eligible A/R typically range from 75%–90%, vs. 50%–70% for equivalent bank lines
Lender underwriting benchmarks
Businesses using ABL report average facility utilization of 65%–75% — indicating right-sizing vs. bank lines
Secured Finance Network operational data
Canadian non-bank lending to SMEs grew by approximately 12% annually over 2019–2023 (BDC / ISED estimates)
Growth trajectory of alternative lending in Canada
Inventory ABL advance rates range from 40%–65%, depending on product type and liquidation assumptions
ABL lender underwriting standards
Citations: Asset Based Lending
Business Development Bank of Canada. Working Capital Financing for Canadian SMEs. Ottawa: BDC, 2023. https://www.bdc.ca.
Medium/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
Canadian Federation of Independent Business. Financing Conditions for Small and Medium Enterprises. Toronto: CFIB, 2023. https://www.cfib-fcei.ca.
Innovation, Science and Economic Development Canada. Financing Your Small Business. Ottawa: ISED, 2022. https://www.ic.gc.ca.
Secured Finance Network. Annual Asset Based Lending Industry Survey. New York: SFNet, 2023. https://www.sfnet.com.
Bank of Canada. Financial System Review. Ottawa: Bank of Canada, 2023. https://www.bankofcanada.ca.
Linkedin."Cash Flow Revolution: Why Canadian Business Chooses Asset Based Lending" .https://www.linkedin.com/pulse/cash-flow-revolution-why-canadian-business-chooses-asset-stan-prokop-4bc9c/
Statistics Canada. Survey on Financing and Growth of Small and Medium Enterprises. Ottawa: Statistics Canada, 2022. https://www.statcan.gc.ca.
7 Park Avenue Financial."Asset Based Lending : Financing Solutions That Match Business Reality".https://www.7parkavenuefinancial.com/Asset-based-Line-of-Credit-Canadian-Solutions.html
Commercial Finance Association. Guide to Asset Based Lending. New York: CFA, 2021. https://www.cfaabl.com.
