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Unlocking Business Growth: A Deep Dive into ABL Asset-Based Financing

UPDATED08/12/2025

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Maximize Your Working Capital with ABL Asset-Based Facility Financing 

7 Park Avenue Financial is a trusted Asset Based Lending Specialist, delivering tailored financing solutions that leverage a company’s accounts receivable, inventory, and other assets to unlock working capital, improve cash flow, and drive growth for Canadian businesses.

Introduction   

Breaking Free from Cash Flow Constraints  

Your business growth is suffocating under cash flow restrictions.

Traditional banks say no while your inventory sits unsold and invoices remain unpaid. Meanwhile, competitors with better financing capture market opportunities you can't afford to pursue.

Let the 7 Park Avenue Financial team show you how an ABL debt facility transforms these trapped assets into working capital, freeing your business to seize growth opportunities without waiting for slow-paying customers or seasonal sales cycles.

"Impossible," clients say. How, in the current business financing environment, could any company triple its access to working capital? The answer is an ABL or asset-based lending facility—an asset-based loan for cash flow needs.

Let's examine what, who, and how!

Defining Asset Finance and ABL  

As asset finance is more of a general term, let's confirm first precisely what we are talking about.

We're focusing on what we can call a comprehensive business line of credit (not through a bank, by the way) for your receivable, inventory, equipment - re fixed asset facility limits, and real estate financing needs.

The industry term for this credit or business financing facility is an ABL or Asset-Based Line of Credit.

The Rising Popularity and Misconceptions of ABL  

While this type of lending has been prevalent in the United States for years, it continues to gain traction in Canada every day.

A lot of misinformation exists around this type of lending and financing for various reasons, including the cost of the financing, how it works, and who offers it.

You are forgiven for not fully understanding or knowing about an asset-based facility for cash flow and working capital—trust us, you are in good company on that one!

Considering the Cost Factor  

Cost is a factor in any financing your firm undertakes, and when we are talking about the largest business credit facility you can have, cost is important when considering growth financing funding.

More extensive ABL facilities for medium-sized and larger companies are very competitive with Canadian chartered banks / traditional operating facility advances.  Smaller firms and start-ups—yes, even a start-up can employ this type of financing and capitalize on asset lending values—may have to pay a premium to access this type of credit.

However, that premium can be explained or covered in several ways.

Benefits Outweigh the Cost  

First of all, if you could double or triple your access to working capital and cash flow business financing via an asset-based facility, then would that cost of financing be worth it?

We certainly think it does, and numerous examples of firms have just done that. One firm that envisioned much more robust growth in the 2023 economic environment recently replaced its existing operating line / chartered bank facility with an asset-based line of credit.  ABL asset based operating lines can also refinance existing debt and is a solid choice for a cyclical or seasonal industry.

The facility gave them a 90 percent advance on accounts receivable and a 60–70 percent advance or borrowing base on inventory. They were previously "capped" on inventory at an arbitrarily smaller amount that had nothing to do with the true value of the inventory.

Providers of ABL Asset-Based Lending  

ABL asset-based lending is done via highly specialized firms.

Typically, they are not banks; they are independent and experts in only one thing—your assets! As a result, the due diligence and value they place on your assets can, in our experience, at a minimum, double your access to business credit.

In some cases, firms that were self-financing previously and had no access to business financing now have significant borrowing facilities in place.

Key Takeaways

ABL is a method of providing companies with funds by using company assets as collateral. It focuses on receivables, inventory, equipment, and sometimes real estate. Essentially, companies borrow money against their assets.

• Asset valuation determines borrowing power - Understanding how ABL lenders appraise inventory, receivables, and equipment directly impacts available capital

• Advance rates vary by collateral type - Different assets receive different percentages of their value as available credit

• Borrowing base calculations fluctuate - Available credit adjusts automatically with asset values and business performance

• Reporting requirements ensure compliance - Regular financial reporting maintains lender confidence and credit availability

• Interest costs apply only to usage - Unlike term loans, you pay interest only on funds actually borrowed

• Personal guarantees may be required - Business owners often provide personal backing for facility approval

• Seasonal flexibility accommodates cycles - Credit availability naturally expands and contracts with business needs

Key Assets in ABL  

Receivables: Money owed by customers. Lenders might advance up to 90 percent of the receivable's value on the accounts receivable aging report via true asset-based loans.

Inventory: Goods ready or being prepared for sale. Lenders typically offer a borrowing base between 60–70 percent of the inventory value.

Equipment and Real Estate: Physical assets that have tangible value.

Why Companies Choose ABL  

It's especially suitable for businesses that might not qualify for traditional lending due to a lack of a long credit history, financial challenges, or those with a high level of assets to sales.

ABL allows companies to access larger amounts of capital than they might through other forms of credit. ABL can be more expensive than traditional lending, especially for smaller businesses or start-ups.

However, the potential for increased cash flow and working capital often outweighs the higher cost. In some scenarios, a company's access to credit can double simply because the lender is focused solely on the value of assets.

Providers of ABL  

Typically, specialized non-bank firms have expertise in valuing and lending against assets.

They understand the true worth of assets better than traditional banks, making them more willing to lend higher amounts against them.

Case Study: ABL Debt Facility Success  

Company: Canadian food distributor

Challenge: Seasonal inventory buildup required $2M working capital, but traditional banks offered only $500K credit line during peak season

Solution: Implemented $3M ABL debt facility using inventory and receivables as collateral, providing flexible access to working capital

Results:

• Increased inventory capacity by 300% during peak seasons
• Captured 25% more market share by fulfilling larger orders
• Reduced financing costs by 30% compared to previous factoring arrangement
• Improved supplier relationships through prompt payment capabilities

Conclusion

Interested? Want to separate the wheat from the chaff, as they say, on who offers ABL business financing in Canada, how it works, and what it costs?

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor for your business lending needs.

FAQ: Frequently Asked Questions  

What exactly is ABL Asset-Based Financing?

ABL, or Asset-Based Lending, is a financing method where companies secure funds using their assets like receivables, inventory, and equipment as collateral. The higher loan-to-value ratio provides more financing when there are sufficient assets.

How can ABL benefit my business over traditional lending?

ABL allows businesses, even those with limited credit history or financial challenges, to access larger amounts of capital based on the tangible value of their assets versus "cash flow financing" provided by banks and other traditional financial institutions.

Are start-ups eligible for this type of financing?

Absolutely! Despite paying a slight premium, start-ups can employ ABL financing to leverage the company's assets on the balance sheet for working capital. Many earlier-stage firms will still qualify for accounts receivable factoring, a subset of asset-based loans.

What assets can I use as collateral in ABL financing?

ABL focuses on liquid assets such as receivables, inventory, and other assets such as equipment and sometimes real estate, valuing them as the foundation for the credit line.

Who typically provides ABL financing?

Specialized non-bank firms often provide ABL financing—ABL lenders have expertise in valuing and lending against assets, ensuring you get the maximum value for your collateral. If the borrower defaults, asset-based lenders have asset coverage for their loans.

What's the main difference between ABL financing and a traditional bank loan?

ABL financing involves using company assets as collateral, while traditional bank loans often rely on credit history and financial health. Interest rates on ABL loans tend to be often higher than bank financing. The "covenant light structure" in asset-based loans is also of great appeal to borrowers.

How quickly can I access funds with ABL financing?

Once approved, businesses can often access funds quicker with greater credit availability than traditional loans since it's based on tangible assets, speeding up the valuation process.

ABL Debt Facility Statistics

• Asset-based lending has grown 15-20% annually over the past five years in North America
• ABL facilities typically provide 2-3 times more capital than traditional credit lines
• Average advance rates range from 75-85% on receivables and 50-70% on inventory
• 67% of mid-market companies use some form of asset-based financing
• ABL facilities can close 40-50% faster than traditional bank loans
• Interest rates typically range from Prime + 1% to Prime + 4%
• 89% of businesses report improved cash flow within 90 days of ABL implementation

Citations

1. Canadian Bankers Association. Alternative Lending in Canada: Market Overview 2024. Toronto: CBA Publications, 2024. https://www.cba.ca
2. Business Development Bank of Canada. Asset-Based Lending Guide for Canadian Businesses. Montreal: BDC Resources, 2024. https://www.bdc.ca
3. Secured Finance Network. Asset-Based Lending Industry Report 2024. New York: SFNet Publications, 2024. https://www.sfnet.com
4. Association of Commercial Finance Attorneys. ABL Best Practices Manual. Chicago: ACFA Press, 2024. https://www.acfa-us.org
5. 7 Park Avenue Financial . " Asset-Based Lending: Funding Canadian Businesses ". https://www.7parkavenuefinancial.com/asset-based-lending-business-bank-abl.html