7 Park Avenue Financial
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TURNAROUND FINANCING IN CANADA
INTRODUCTION
When cash pressure builds, waiting for your bank to “see improvement” can shrink your options quickly. 7 Park Avenue Financial works with Canadian business owners facing refinancing, debt-maturity, lender-exit, and working-capital challenges, helping structure financing around real assets, operating cash flow, and a credible recovery plan.
What Is Turnaround Financing?
Turnaround financing provides capital to a financially stressed but potentially viable business while it carries out a measurable recovery plan. Funding may support payroll, suppliers, restructuring costs or essential changes that restore positive cash flow.
Turnaround financing works when temporary liquidity problems or correctable operating issues can restore sustainable cash flow—not when the business consistently loses money on every sale.
Who Needs Turnaround Funding
Turnaround financing can be relevant when your company has an underlying viable business but a funding structure that no longer fits its current condition.
Common situations include:
A bank loan is maturing, and renewal is uncertain.
Your lender has reduced your operating line or tightened covenants.
Tax arrears, supplier balances, or short-term debt are consuming daily cash flow.
Strong receivables, inventory, equipment, or real estate exist, but cash is tight.
A large customer delay, contract loss, cost overrun, or seasonal downturn has interrupted working capital.
The business needs time to complete a margin improvement, sale process, asset disposition, or management transition.
Multiple high-cost loans need to be consolidated into a more manageable structure.
3 Uncommon Takes On Turnaround Funding
A bank decline may reflect timing, not viability. Non-bank lenders may fund the same business by pricing risk against its assets.
Speed can matter more than rate. Missed payroll or stopped supplier shipments may cost more than higher financing fees.
Turnarounds often require a financing stack. Factoring, ABL and other facilities may work better together than one replacement loan.
Corporate turnaround business financing involves fixing major problems in a Canadian business. ABL asset-based financing is one of the best solutions for ' the fix '. Let's explain why, so let's dig in.
Turnaround financing provides a financial lifeline for businesses experiencing financial challenges. Let the 7 Park Avenue Financial team show you proven ways to refinance your business and achieve new success.
Shocking statistic: According to a study by the Turnaround Management Association, only 30% of businesses that receive turnaround funding successfully complete their restructuring and return to profitability within five years.
Turnaround Funding: Fixing What Went Wrong in Business Financing
Top experts will agree that there is nothing more challenging than a turnaround - in effect, it's a ‘ renewal ‘ of a business, and financing will not always, but more often than not, play a major role in that renewal.
Turnaround services are crucial in assisting businesses facing financial and operational challenges by providing tailored solutions and strategic financial planning. Going through that whole process is also a tremendous way to understand ‘ what went wrong ', and as we’ve said many times:
‘Tuition is very costly in the school of experience.’!!
How turnaround financing differs from a standard loan
Area
Standard business loan
Turnaround financing
Area
Standard business loan
Turnaround financing
Main purpose
Fund growth, equipment, acquisitions, or routine working capital
Stabilize liquidity and support a defined recovery plan
Underwriting focus
Historical profitability, credit profile, and debt-service coverage
Asset value, cash conversion, stakeholder risk, and recovery milestones
Timing
Often weeks to months
May be time-sensitive when a renewal, demand, or enforcement risk exists
Security
Frequently based on conventional collateral and bank policy
May use receivables, inventory, equipment, real estate, or a broader security package
Pricing
Typically lower when credit is strong
Often higher because execution and credit risk are higher
Exit plan
Normal amortization or operating cash flow
Refinancing, asset sale, improved performance, or a return to conventional credit
4 KEY ISSUES IN TURNAROUND FINANCE
During a ‘turnaround,’ several major issues tend always to come up - they include areas such as:
People issues
Rightsizing the company to allow it to grow again
Address legal issues that might even include a protection filing under Canada’s CCAA process (It’s the equivalent of Chapter 11 in the United States
Business restructuring addresses these financial and operational challenges by providing tailored solutions to optimize performance, manage risks, and implement strategic plans to restore financial stability and stakeholder value.
We’re focusing primarily on financing here, but it’s safe to say many other issues will always come into play. Also, we’re mostly talking about an ‘operating’ turnaround rather than the ‘strategic’ issues involved in products, markets, engineering, etc.
HOW DOES ' ABL ' ASSET BASED LENDING HELP A TURNAROUND WITH CASH FLOW?
ABL… It’s the acronym for asset-based lending, which helps address the 3 critical areas of corporate turnaround business financing - sales revenues, cost issues, and asset management and finance issues.
Alternative lenders are crucial in providing ABL solutions for turnaround financing, especially when traditional bank loans are not an option. It’s a key solution that helps a firm complete its financial restructuring.
THE ALTERNATIVE TO NEW OWNER EQUITY
An asset-based line of credit is all about refinancing growth when equity issues are strained.
Flexible funding is crucial in these situations, as it provides the support needed to address equity issues and foster growth during a turnaround.
While it's more often an operating facility that covers all the company's assets, it can also, when applicable, include a term solution that complements the company's overall long-term needs.
ASSET BASED LOANS ARE PRIMARILY FROM ALTERNATIVE LENDERS
Typically, an ABL business credit facility is a non-bank solution that supports a broad range of challenges and industries.
(NOTE - Some banks offer ABL financing but the why and how of that is a subject for another day)
THE COST OF FINANCING
ABL is sometimes priced as competitively as a bank solution - we will call those TIER 1 asset financing.
Still, most firms requiring a turnaround will typically pay a major premium to bank pricing because of the inherent credit and perception challenges involved in a turnaround.
Assessing the balance sheet's status is crucial in these scenarios, as a strong, stable balance sheet can support effective turnaround strategies despite cash-generation limitations.
ASSET- BASED LENDING LOANS ARE ALL ABOUT YOUR SALES AND ASSETS
The essence of the ABL turnaround solution is financing all the firm's business assets, maximizing its borrowing power. It helps businesses facing financial stress restructure
The restructuring process is crucial in supporting financial restructuring through asset-based lending (ABL), allowing companies to stabilize and improve operations while managing their financial restructuring.It assists businesses facing financial distress who often can't access traditional bank financing
Typically, accounts receivable are financed at 90% of their ongoing value, inventory is margined at anywhere from 25-75%, and the unique part of the ABL solution is the ability to carve out the fixed assets/equipment of the business and include them in the borrowing power mix.
Company-owned real estate can also be included as a part of the asset-based loan, further enhancing working capital access.
DUE DILIGENCE IN BUSINESS RESTRUCTURING
Typical requirements to get the ABL solution in motion include due diligence on business assets, the firm's ability to provide ongoing financials, and a long-term cash flow and sales forecast.
Collaborating with the management team is crucial in securing and implementing turnaround financing. They are key in identifying financial issues, developing strategic options, and executing solutions to restore financial performance, especially in challenging and urgent situations.
How Can Turnaround Financing Improve Supplier Terms?
Turnaround capital provides the cash needed to clear overdue supplier balances and restore vendor confidence. This can help a business replace COD requirements with negotiated payment terms, improving liquidity and supply continuity.
How Do Canadian Priority Claims Affect Turnaround Financing?
Unremitted payroll source deductions, GST/HST and certain employee wage claims may rank ahead of secured lenders or reduce available collateral. Turnaround lenders therefore review CRA and provincial liabilities carefully before determining loan availability and security priority.
Case Study #1
Company: ABC Manufacturing Inc. (Precision Industrial Equipment Sector)
Challenge: ABC Manufacturing faced severe liquidity pressures following a major client default, causing vendor payment delays and a formal forbearance notice from their primary bank.
Solution: How We Got There: 7 Park Avenue Financial arranged a $2.5 million turnaround financing facility structured through asset-based lending against eligible accounts receivable and machinery, replacing the restrictive bank line within 18 days.
Results: ABC Manufacturing satisfied outstanding payroll tax liabilities, restored normal trade terms with key suppliers, and achieved positive operating cash flow within six months.
Case Study # 2 Southern Ontario Restaurant Group
After its bank froze its credit line, a three-location restaurant group faced immediate payroll and supplier pressure. 7 Park Avenue Financial arranged factoring against commercial receivables and asset-based financing against equipment, supported by a bank subordination agreement.
The company covered payroll, renegotiated supplier terms and returned to conventional bank financing within eight months.
Capital injection serves as the cornerstone of turnaround efforts, providing much-needed liquidity.
Restructuring operations often involves streamlining processes and cutting unnecessary costs.
Debt renegotiation with creditors can alleviate immediate financial pressures on struggling businesses.
Strategic repositioning helps companies identify new markets or products to revitalize their business model.
Effective cash flow management ensures optimal allocation of resources during the turnaround process.
CONCLUSION - NEW LIFE INTO YOUR BUSINESS WITH EXPERT TURNAROUND FINANCE SOLUTIONS
If your company needs corporate turnaround business financing, consider ABL as a way to implement a solution quickly. Those dwindling options you thought of suddenly emerge with a clear, viable solution that’s alternative in nature but has proven to work well for thousands of firms in finance restructuring.
To attract turnaround funding, you must show your company is a viable business with a solid operational foundation and experienced management in finance turnarounds.
FAQ/FREQUENTLY ASKED QUESTIONS - THE COMPANY TURNAROUND
How is turnaround funding different to traditional funding?
Turnaround funding is designed for struggling businesses. It has more flexible terms and a higher risk tolerance than traditional funding. It provides capital to implement changes and improve the business rather than just paying the bills.
What types of businesses can use turnaround funding?
Any business in distress or at risk of bankruptcy can use turnaround funding. It can be in any industry, any size, or any stage of decline as long as it has the potential to recover and a viable turnaround plan.
How long does it take to get turnaround funding?
The timeframe for getting turnaround funding varies depending on the situation and the lender’s due diligence process. In emergencies, some lenders can fund in a few weeks, but in more complex situations, it can take several months to finalize.
What’s the role of management in getting turnaround funding?
Management plays a big part in getting turnaround funding. Lenders will assess the management team’s ability and deep understanding of executing the turnaround plan in the business plan. In some cases, hiring turnaround specialists such as 7 Park Avenue Financial to identify potential lenders or changing management may be required to get funding and, in most cases, get the company back on track.
How does turnaround funding affect existing stakeholders?
Turnaround funding affects existing stakeholders. While it gives the business a chance to recover, it may dilute ownership, restructure debt, or change management control. However, strategic plan rescue financing is often a better option for all parties than bankruptcy.
What’s AR financing, and how does it work?
Accounts Receivable (AR) financing allows businesses to borrow against their outstanding invoices. The financing company provides an advance on unpaid invoices, usually 70-90% of the value, so companies can get immediate cash flow.
Are there industry restrictions for AR financing?
While AR financing is available across many industries, some may have restrictions or higher fees due to risk. Industries with long payment cycles or high chargeback rates may find it harder to get good AR financing terms.
How is AR financing different from factoring?
AR financing and factoring are similar, but factoring involves selling the invoices to a third party, while AR financing uses the invoices as collateral for a loan. Factoring usually includes collections, while AR financing leaves invoice management to the business.
What are the costs of AR financing?
AR financing costs include an advance rate (a percentage of the invoice value provided upfront) and a factor fee (a percentage of the total invoice amount). Additional fees may apply for credit checks, wire transfers, or extended payment terms.
How long does it take to get funded through AR financing?
Funding through AR financing can take different amounts of time, but many providers offer same-day or next-day funding once an account is set up. The initial setup and approval process can take a few days to a week, depending on the business's complexity and invoicing structure.
What do lenders look at when evaluating turnaround funding candidates?
Lenders will assess the viability of the turnaround plan, the company’s history, current market, management capability, and potential return on investment. They will also examine the company’s assets, cash flow projections, and level of stakeholder support for the turnaround.
How does turnaround funding impact a company’s long-term financial structure?
Turnaround funding often significantly changes a company’s financial structure. It may involve debt restructuring, equity dilution, or new investors. While it provides immediate relief, it can also impact future borrowing capacity and ownership dynamics. The aim is to create a sustainable financial foundation for long-term success.
What are the elements of a turnaround plan when seeking funding?
A turnaround plan should include a detailed review of the current situation, clear problems, operational improvement strategies, financial projections to profitability, an implementation timeline, risk factors, and contingency plans to reassure funders.
STATISTICS
Construction accounted for the largest share of business insolvencies in 2025 (15.5%), followed closely by Accommodation and Food Services (13.7%) ISED Canada
CAIRP reported 4,840 total business insolvency filings in 2025, down 21.8% from 2024, but still 31.5% above the pre-pandemic average from 2016–19 Cairp
Business insolvencies for the 12-month period ending January 31, 2026 decreased 18.3% compared with the same period ending January 31, 2025 ISED Canada
Business insolvencies for the 12-month period ending March 31, 2026 rose 1.1% month-over-month, even as the trailing 12-month figure was still down 14.1% year-over-year
ABOUT THE AUTHOR: Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil
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