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Asset-Based Lending

Asset-based lending (ABL) allows you to capitalize on your company’s assets, such as accounts receivable, machinery, and inventory. It provides your company with funding that can be used to improve operations or take on new projects.

Asset-based lines are an effective financing tool for small and midsize companies. They have simpler qualification criteria, fewer covenants than conventional financing, and can be deployed faster.

Commercial Capital is a leading provider of asset-based financing solutions in Canada. We have over 20 years of experience financing small companies.

Fill out this form to get information, or call us toll-free at (877) 300 3258 to speak with a representative.

How does asset-based financing work?

An asset-based line can operate as a revolving line, a term loan, or a combination of both. The configuration depends on the assets that are being leveraged.

Most ABLs operate with a borrowing certificate. The borrowing certificate determines what percentage of the assets can be leveraged. The three most common asset types for corporate asset-based loans are accounts receivable, inventory, and machinery.

Read “What is an Asset-Based Loan?” to learn more.

1) Accounts receivable

The accounts receivable-backed component of an ABL operates like a revolving line of financing. The line allows you to draw funds up to a limit determined by the borrowing certificate. The line is paid back as the receivables that back it are paid.

2) Inventory

The inventory component of the ABL operates like a revolving line based on the value of the inventory. Inventory can be leveraged based on a percentage of its appraised value.

Most financing firms use the Net Orderly Liquidation Value (NOLV) to appraise inventory, but this varies. In some cases, the NOLV may be substantially lower than what you paid for the inventory.

3) Machinery

Asset-based loans secured by machinery operate like term loans. Your company can borrow up to a specific percentage of the machinery’s appraised value. The line is repaid over a period of time, like a conventional term line.

Clear benefits

Asset-based financing solutions have several advantages over other solutions of comparable size. The most common advantages include:

  1. Improved liquidity
  2. Asset flexibility
  3. Flexibility of use
  4. Quick deployment
  5. Simpler qualification
  6. Fewer covenants than loans
  7. Lower costs than other alternatives
  8. Stepping stone to other products


Asset-based loans have few restrictions and can be used for any tactical or strategic business purpose, such as:

  1. Improving working capital
  2. Fulfiling large orders
  3. Expanding businesses
  4. Purchasing corporate assets
  5. Financing turnarounds
  6. Acquiring businesses
  7. Performing leveraged buyouts (LBOs)

Qualification criteria

Asset-based financing is easier to obtain than comparable solutions. To qualify, your company should meet these criteria:

  1. Minimum utilization of $10,000,000
  2. Accounts receivable from creditworthy commercial clients
  3. Additional quality assets, if needed
  4. Effective internal controls and collections
  5. Reasonable financial statements
  6. Must be up to date in taxes or have a workout plan in place
  7. Must be profitable. Alternatively, it must have a turnaround plan.


We can work with companies that offer products and services to other businesses or government entities. Industries include:

  • Business services
  • Manufacturing
  • Staffing
  • Trucking
  • Wholesalers
  • Oilfield service companies
  • Office supplies
  • Technology firms
  • Consulting
  • Logistics

Choose the right financing partner

The decision to work with an asset-based lending company is crucial to your company’s success. Consider the following as you perform your due diligence:

1. How long has the lender been in business?

You are likely better off with a lender that has been in business for several years. They are more likely to have experience managing a portfolio of clients through different economic environments.

2. Does the lender have experience in your industry?

Working with a lender that is familiar with your industry is important. This familiarity ensures they know the nuances of your industry. This experience is more important in some industries, such as transportation, oil and gas, and staffing.

3. Is the lender based in Canada?

There are several asset-based lending providers in Canada, and the market is competitive. There are also several companies in the US that provide ABLs in Canada.

We think that longevity and industry experience are more important than location when selecting a provider. However, some businesses consider location important and prefer to work with a local company.

4. Do they have experience with your specific type of collateral?

Some asset-based lenders can provide financing against most collateral types. Other lenders prefer to work with specific collateral, such as accounts receivable, and only finance other types of collateral as an accommodation. You get better terms from a lender that is comfortable with your company’s collateral.

5. Will an onsite visit be required?

This requirement varies based on the type of collateral you are financing and the financing company you plan to work with. Lines with an inventory and machinery financing component usually require an onsite appraisal. Lines with only an accounts receivable component may require an onsite audit. The appraisal may be conducted by the lender or through a third-party auditor.

Essential reading

We want to help you make an educated decision about using our services. Commercial Capital keeps an extensive learning centre with information about our products and how they work.