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ASSET BASED LENDING LINE OF CREDIT SOLUTIONS IN CANADA
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
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"Capital is to the progress of society what gas is to a car—the essential input that makes the machine work." — Hernando de Soto, Economist
Is There an Alternative to a Bank Business Line of Credit?
Many Canadian owners and financial managers still associate revolving business credit solely with chartered banks. Banks do offer the lowest rates and deep lending capacity. However, not every company qualifies for a traditional credit line.
The Working Capital Gap That's Costing Your Business
Your company has receivables coming in next month, but operating expenses and payroll is due this week. Bank unsecured lines will often take take 60 days to review applications while opportunities slip away.
A secured business line of credit provides immediate access to revolving funds backed by your assets, giving you control when cash flow doesn't match your timeline.
3 Uncommon Takes on Secured Business Lines of Credit
The Real Cost Isn't the Interest Rate:
Most business owners fixate on APR comparisons, but the actual expense of NOT having a secured line of credit —missed opportunities, supplier discounts you can't take, rush shipping fees, and stress-induced decision-making—often exceeds the annual interest cost by multiples.
Your Assets Are Already Working Against You: If you own equipment, inventory, or receivables but don't have a secured line attached to them, those assets are actually creating risk rather than reducing it. They're tying up capital that could be deployed while providing zero liquidity benefit during cash crunches.
Approval Speed Matters More Than You Think: The difference between 48-hour funding and 45-day bank processing isn't just convenience to access funds —it fundamentally changes which business opportunities you can pursue and how you negotiate with suppliers and customers.
Asset-based loans (ABL) function as flexible revolving credit facilities secured by receivables, inventory, and equipment.
The model grew in popularity in the United States and now serves thousands of Canadian firms unable to access traditional banking.
These solutions increase working-capital availability by converting sales, receivables, and inventory into reliable cash flow. Borrowers pay interest only on funds drawn down .
Provides ongoing revolving liquidity
Higher advance rates than banks
Flexible structures designed around operational needs
At 7 Park Avenue Financial, we emphasize that ABL is primarily about access to credit, not the cost of credit.
How ABL Credit Lines Differ from Bank Financing
Unlike banks, ABL lenders frequently impose no hard upper borrowing limit. Borrowing power increases as a company grows its receivables and inventory base. Bank lines remain capped, reviewed once annually, and heavily dependent on financial ratios, covenants, and profitability metrics.
Banks rarely finance companies with deficit equity, but ABL lenders often do when strong sales and assets exist.
If the business owns real estate, lenders may include real-estate equity inside the ABL facility or through a separate bridge loan.
Owners often ask how non-bank lenders offer flexibility that banks cannot. The answer lies in the nature of the lenders and their underwriting models. ABL providers focus on assets, not restrictive ratios and covenants.
Key characteristics include:
Non-regulated lender structures
Collateral-driven lending based on receivables, inventory, and equipment
Customized credit structures aligned with operational cycles
How ABL Facilities Are Managed
ABL lenders require detailed due diligence when establishing the facility. They rely on consistent reporting to monitor asset performance and collateral quality. Companies typically provide monthly aged receivables, aged payables, inventory reports, and equipment summaries.
Why Choose an Asset-Based Credit Line?
Fast-growth companies often outgrow bank lending parameters. Seasonal swings, large purchase orders, or "bulge" working capital needs make ABL a strong fit. ABL delivers higher borrowing capacity precisely when the business needs it.
What Companies Qualify for Asset-Based Credit?
Firms unable to meet bank requirements often qualify for ABL if they maintain clean financials and can produce regular asset reports. Companies with solid receivables and inventory enjoy the highest benefit. Businesses with fluctuating earnings or thin equity routinely use ABL.
Minimum and Maximum Facility Sizes
Typical Canadian ABL facilities begin at $250,000.
There is effectively no maximum for companies with strong asset bases and ongoing reporting capacity.
Most ABL lenders in Canada are non-bank institutions. However, several chartered banks operate small internal ABL divisions. Requirements may resemble traditional bank products, and clients often find non-bank lenders more flexible and responsive.
Increased Borrowing Power
ABL lines provide significantly higher advance rates than traditional loans. Accounts receivable may be margined at up to 90%, while inventory and equipment can be included in the same facility. As sales and assets increase, borrowing limits expand automatically—driving predictable growth.
Case Study: Secured Line of Credit for a Commercial Printing Business
From The 7 Park Avenue Financial Client Files
Company: ABC Company, a 15-year-old commercial printer in Ontario.
Challenge:
The business struggled with cash flow because it had to pay for paper and supplies upfront while customers paid on net-60 terms. This caused constant payment pressure, $30,000 in lost early-pay discounts, and the bank refused additional credit due to existing term loans.
Solution:
ABC Company obtained a $250,000 secured revolving line of credit, backed by $400,000 in equipment and receivables. Approval came in four days from an alternative lender. They drew funds to pay suppliers early, then repaid and redrew as receivables came in.
Results:
Within six months, the company gained $18,000 in supplier discounts, strengthened supplier relationships, and secured a major new client needing $80,000 in upfront materials. The line matched their 45-day cash cycle, with average monthly interest of $1,200—far less than their previous lost discounts. Management shifted from cash-crisis mode to proactive growth planning.
Key Takeaways
ABL is the primary alternative to a bank business credit line in Canada.
Borrowing power increases with receivables, inventory, and equipment growth.
ABL lenders focus on assets, not restrictive covenants or profitability ratios.
Facilities often begin at $250,000 with no practical upper limit.
Advance rates may reach 90% on receivables, far higher than bank lines.
ABL supports fast growth, seasonality, and operational variability.
Banks offer limited internal ABL programs, but non-bank lenders dominate the market.
Conclusion
Asset-based lending is no longer a hidden market in Canada.
It continues to gain traction as companies seek flexible, covenant-light financing. For a tailored assessment, call 7 Park Avenue Financial , a trusted Canadian financing advisor who can evaluate whether your business is ready for an ABL facility.
FAQ / Q&A: Secured Business Lines of Cred it
What documentation is required for a secured business line of credit?
Lenders focus on verifying collateral and current cash flow. You’ll typically provide recent financial statements, A/R aging, inventory reports, equipment details or appraisals, and 3–6 months of bank statements. Business registration documents, proof of asset ownership, and possible personal guarantees are also standard. Requirements are generally lighter than traditional bank loans because underwriting is asset-driven. A business plan can be helpful but not required for business credit access approval for a defined limit.
How does a secured business line of credit affect the balance sheet?
Drawn funds appear as current liabilities, while unused portions show as available liquidity. Your debt-to-equity ratio changes only when you draw on the line. Because it’s revolving credit, your balance sheet reflects real-time usage rather than long-term debt, which can help present stronger financial ratios during reviews.
Can a secured business line of credit be used for both operations and growth?
Yes. Businesses use secured lines for payroll, inventory, seasonal working capital, receivable gaps, and growth initiatives such as marketing or equipment purchases. Flexibility is a core benefit, though the strongest results come from using funds for revenue-producing activities rather than covering ongoing losses.
What monitoring or reporting do lenders require?
Reporting depends on collateral. A/R-secured lines need monthly aging reports; inventory facilities require periodic inventory reporting or counts; equipment-secured lines usually have lighter monitoring. Lenders may perform collateral audits and request monthly or quarterly financial statements.
How can refinancing existing debt with a secured line help a business?
Refinancing can consolidate multiple debts, reduce interest costs, and improve cash-flow management. A secured line often provides better pricing and more flexibility than term loans or merchant cash advances. It’s beneficial when total capital costs drop or when refinancing removes restrictive covenants or personal guarantees.
Additional Clarifying Questions
How is a secured business line of credit different from asset-based lending?
A secured line of credit is a form of asset-based lending, but the term “ABL” usually applies to larger, more complex facilities with tighter monitoring. Secured lines are typically simpler and geared to small and mid-sized businesses, though both rely on collateral for approval.
How does personal liability work in secured credit line agreements?
Lenders may require personal guarantees, meaning the owner is personally responsible if the business defaults. Some facilities are non-recourse if collateral coverage is strong, so understanding guarantee terms is critical before signing.
What happens to a secured business line of credit if the business is sold?
Changes in ownership usually require lender consent and may trigger repayment. Lenders may continue the facility if the buyer is qualified. Sale agreements should specify how the credit line will be handled—paid off, assumed, or replaced—to avoid delays.
Statistics
According to the Canadian Federation of Independent Business, approximately 75% of small businesses report difficulty accessing traditional bank financing
Asset-based lending (including secured lines of credit) grew by 12% annually in Canada over the past five years
Businesses using revolving credit facilities report 23% better cash flow management compared to those relying solely on term loans
The average approval time for secured business lines of credit is 3-7 days versus 30-60 days for traditional bank loans
Canadian businesses with access to flexible credit lines are 40% more likely to take advantage of early payment discounts
Citations
Canadian Federation of Independent Business. "Small Business Financing Challenges in Canada." CFIB Publications, 2024. https://www.cfib-fcei.ca
Substack/Stan Prokop."Comparing Business Credit Lines: Which One's Right for You?".https://stanprokop.substack.com/p/comparing-business-credit-lines-which
Business Development Bank of Canada. "Alternative Financing Solutions for Canadian Businesses." BDC Knowledge Centre, 2024. https://www.bdc.ca
Medium/Stan Prokop/7 Park Avenue Financial." Business Line Of Credit Challenges in Canada: We Know Why".https://medium.com/@stanprokop/business-line-of-credit-challenges-in-canada-we-know-why-b03ecd0e01cd
Industry Canada. "Asset-Based Lending Market Analysis." Innovation, Science and Economic Development Canada, 2023. https://www.ic.gc.ca
Commercial Finance Association. "Canadian Asset-Based Lending Growth Report." CFA Research Publications, 2024. https://www.cfa.com
Financial Consumer Agency of Canada. "Understanding Business Lines of Credit." FCAC Business Resources, 2024. https://www.canada.ca/en/financial-consumer-agency
7 Park Avenue Financial ." Business Credit Line Financing Asset Based Lending" .https://www.7parkavenuefinancial.com/business-credit-line-financing-asset-based-lending.html
