YOUR COMPANY IS LOOKING FOR A NEW BUSINESS LINE OF CREDIT!
ASSET BASED LOANS / ASSET BASED FINANCING
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing and cash flow are the biggest issues facing businesses 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 are not assets because of their definition. They are assets because of the value they create and the opportunities they enable." — Business financing principle, adapted from investment philosophy
Credit Lines and Asset Funding: The Business Lifelines Explained
The Capital Access Gap That's Costing Your Business
You need working capital, but your bank application sits in limbo for weeks. Meanwhile, opportunities slip away, vendors demand payment, and payroll looms.
Asset based funding solves this by converting your existing assets into immediate cash flow, bypassing traditional underwriting obstacles and putting capital in your hands when it matters most.
3 Uncommon Takes on Asset Based Funding
Asset based funding works best for businesses that banks consider "too risky"—but that's actually a strength, not a weakness.
The lending decision focuses on asset quality rather than balance sheet perfection, which means companies going through transitions, rapid growth, or restructuring can access capital when they need it most. Your assets tell a story that financial statements alone cannot capture.
Most business owners think of asset-based funding as "emergency financing," but sophisticated companies use it as a permanent capital structure strategy. The revolving nature of asset-based lines means your available capital grows automatically as your business grows, creating a self-scaling financing solution that traditional term loans simply cannot match.
The real cost of asset based funding isn't the interest rate—it's the opportunity cost of not having access to your working capital when you need it. A slightly higher rate that puts $500,000 in your account this week beats a lower rate that might arrive in two months, especially when that capital unlocks a contract worth millions or prevents expensive late payment penalties.
Introduction
Business credit lines in Canada are increasingly difficult to obtain. Many companies are approved for less capital than required, or declined altogether.
The issue is not weak businesses. It is rigid bank cash-flow lending models that fail to reflect real operating assets.
Asset-based funding offers a practical solution by using business assets to support larger, more flexible credit lines.
Why Business Credit Lines Fail Canadian Companies
Traditional banks rely heavily on cash-flow ratios and covenants. Growing firms often fail to meet these thresholds despite strong sales.
Common challenges include:
Net 60–90 day payment terms
Rapid growth straining ratios
Concentrated customers
Seasonal revenue swings
Asset-based funding addresses these gaps directly.
What Is Asset-Based Funding?
Asset-based funding uses business assets as collateral for financing. These assets support a revolving line of credit.
Eligible assets typically include:
Accounts receivable
Inventory
Equipment
Company-owned real estate
The borrowing limit rises as asset values increase.
Asset-Based Lending Works Across Industries
Asset-based lending works for startups, mid-market firms, and large enterprises. Industry restrictions are rare.
Key eligibility requirements include:
Consistent sales
Tangible, measurable assets
Reliable receivables or inventory
If assets exist, borrowing power exists.
Pooling Business Assets Into One Credit Facility
Asset-based credit lines use a pooled structure. Multiple asset classes are combined into one revolving facility.
This “borrowing base” may include:
Receivables
Inventory
Equipment
Owned real estate
Businesses draw and repay capital as needed.
Unlocking Borrowing Power With Asset-Based Lenders
Pooling assets dramatically increases available capital. It converts idle balance sheet items into working cash flow.
ABL lenders focus on:
Asset quality
Liquidity
Sales consistency
Covenants are typically lighter than bank facilities.
Subsets of Asset-Based Lending
Asset-based lending includes several specialized structures. Each targets a specific asset type.
Common ABL subsets include:
Accounts receivable lines (factoring-style facilities)
Inventory financing
Equipment-backed credit lines
Real estate-supported operating lines
Combining assets usually produces the strongest result.
Example of Asset-Based Funding
A Canadian manufacturer lost all bank financing following litigation. The company was left with zero borrowing capacity.
An ABL facility was structured using receivables, inventory, and unencumbered equipment. The result was a $500,000 revolving credit line.
Borrowing power increased from zero to $500,000.
What Does Asset-Based Lending Cost?
ABL pricing varies by deal size and asset mix. Smaller facilities often carry higher rates than bank loans.
However:
Larger ABL deals can price below bank facilities
Interest rates remain historically low
Competition among ABL lenders is strong
Most firms accept higher costs in exchange for higher limits.
Case Study Summary: Asset-Based Funding Success
ABC Company, a mid-sized Canadian manufacturer of industrial equipment parts, secured major construction contracts but lacked sufficient working capital to fulfill them. Despite $8 million in annual revenue and strong margins, its bank credit line was capped at $750,000, well below the $1.2 million required. The bank’s requirement for improved profitability would have forced ABC to decline $2.5 million in annual growth opportunities.
7 Park Avenue Financial arranged a $1.5 million asset-based revolving credit facility secured by accounts receivable and inventory. The facility was approved in 10 business days and advanced up to 80% on receivables and 55% on inventory, allowing capital availability to scale with production and invoicing.
As a result, ABC fulfilled all contracts, added $2.5 million in annual revenue, and increased gross margins by 8% through bulk purchasing. After 18 months of improved financial performance, the company successfully transitioned to a larger, lower-cost traditional bank facility, using asset-based funding as a growth bridge.
Key Takeaways
Asset-based funding unlocks credit using business assets
Borrowing limits increase as assets grow
ABL works across most industries
Facilities are revolving and flexible
Costs may be higher, but limits are larger
Covenant-light structures reduce risk of default
Conclusion
Every business has unique working capital needs. The right financing structure depends on assets, growth stage, and cash flow.
Asset-based funding often outperforms traditional business credit lines. It delivers higher limits and greater flexibility.
7 Park Avenue Financial helps Canadian businesses structure asset-based credit lines that increase borrowing capacity.
Frequently Asked Questions - ASSET BASED FUNDING
What are business credit lines?
Business credit lines are revolving loans that allow companies to borrow up to a limit and pay interest only on funds used.
How does asset-based funding work?
ABL uses assets such as receivables or inventory as collateral. Loan size depends on asset value, not income covenants.
What are the main benefits?
Flexible access to capital without equity dilution. Higher limits than traditional bank lending.
Are there risks?
Yes. Poor cash management or declining asset values can reduce availability.
Who benefits most from ABL?
Growing firms with strong assets but weaker bank ratios.
Do startups qualify?
Some do, depending on asset quality and customer base.
Is personal collateral required?
Typically no. Business assets secure the facility.
How fast can funding be accessed?
ABL is often faster than bank loans once assets are verified.
Does ABL affect credit scores?
Yes. Like all credit products, performance matters.
Are there usage restrictions?
Fewer than traditional loans, but terms vary by lender.
Statistics - Asset Based Funding
The Canadian asset based lending market has grown approximately 12-15% annually over the past decade, reaching an estimated $35-40 billion in outstanding facilities as businesses increasingly seek alternatives to traditional banking.
Asset-based lenders typically advance 75-85% against eligible accounts receivable and 50-65% against qualified inventory, with combined advance rates often reaching 60-75% of total working capital assets.
Research indicates that businesses using asset based funding report approval timelines of 7-14 days on average, compared to 60-90 days for traditional bank financing.
Approximately 40% of asset based funding users are businesses in growth phases with revenues between $5 million and $50 million, while another 30% are companies undergoing restructuring or turnaround situations.
Studies show that effective asset based funding can reduce cash conversion cycles by 30-45%, significantly improving working capital efficiency and enabling businesses to take on 20-35% more sales volume without additional equity investment.
Citations on Asset Based Funding
Commercial Finance Association. "Asset-Based Lending: A Guide for Business Owners." CFA Resources, 2024. https://www.cfa.com
Business Development Bank of Canada. "Alternative Financing Options for Canadian Businesses." BDC Resources and Tools, 2024. https://www.bdc.ca
Equipment Leasing and Finance Association. "State of the Equipment Finance Industry." ELFA Industry Reports, 2024. https://www.elfaonline.org
Federal Reserve Bank. "Working Capital Finance and Asset-Based Lending Study." Economic Research Publications, 2023. https://www.federalreserve.gov
Canadian Federation of Independent Business. "Access to Financing: Survey of Small and Medium Enterprises." CFIB Research, 2024. https://www.cfib-fcei.ca
Journal of Commercial Lending. "Asset-Based Lending in Economic Cycles." Quarterly Review, vol. 45, no. 3 (2024): 22-31. https://www.journalofcommerciallending.com
Deloitte Canada. "Alternative Financing Trends in Canadian Middle Market." Financial Advisory Insights, 2024. https://www.deloitte.com/ca
Industry Canada. "Financing Growth: Options for Small and Medium Enterprises." Innovation, Science and Economic Development, 2024. https://www.ic.gc.ca
7 Park Avenue Financial ."
