Asset-based lending in Canada follows the same basic logic as anywhere else. A lender sets a borrowing base from your receivables and inventory, and sometimes your equipment and real estate, and lets you draw a revolving facility up to that amount. For companies with a strong balance sheet but uneven earnings, or for those growing faster than their cash flow, it can provide more liquidity than a cash-flow loan and fewer financial covenants.
The Canadian market has its own shape, though, and a few local rules have a direct effect on how much you can borrow.
Who lends
Canada's business lending market is concentrated. The Bank of Canada noted in an August 2026 analysis that banks and public debt markets provide about three quarters of the external funding of non-financial businesses, and that non-bank loans have held at about 15 percent of business credit over the past decade. Private credit, it concluded, remains a stable and relatively limited source of funding for Canadian businesses.
In asset-based lending specifically, that means three main groups:
- the asset-based lending teams of the large domestic banks
- U.S. and international asset-based lenders with Canadian operations, often active in cross-border facilities
- independent and specialty lenders, including equipment finance providers and funds that take on more complex or stressed situations
The banks are usually cheapest for larger, cleaner credits. Specialty lenders fill the gaps: smaller facilities, turnaround situations, higher advance rates against particular assets and businesses that a bank's policy does not fit.
The borrowing base
As in the U.S., the borrowing base starts with eligible receivables at an advance rate commonly in the region of 85 percent, plus eligible inventory at a lower rate, often set against an appraised net orderly liquidation value. Lenders exclude aged invoices, related-party balances, contra accounts and concentrations above set limits, and they carry out field exams and appraisals before closing and periodically afterward. If you sell to the U.S. or other foreign customers, ask early how those receivables will be treated, because some lenders require credit insurance before they count them.
The Canadian specifics
Security registration
In the common law provinces, lenders take and register security over personal property under each province's Personal Property Security Act. In Quebec, the equivalent security is a movable hypothec under the Civil Code. A company with assets or operations in several provinces will see registrations in each, and a lender will search them all to confirm there are no earlier claims on the same assets, including equipment leases and purchase money security interests.
Priority claims and reserves
This is the area that most often surprises borrowers coming from the U.S. Under Canadian law, certain claims can rank ahead of a secured lender, particularly in an insolvency. They include amounts withheld from employees for income tax, Canada Pension Plan and Employment Insurance that have not been remitted, a limited amount of unpaid wages, certain unpaid pension contributions and, depending on the province, other statutory claims. Canadian ABL lenders protect themselves by taking reserves against these amounts in the borrowing base, which reduces availability. Keeping remittances current and documented is one of the simplest ways to protect your borrowing capacity.
Pricing benchmarks
Canadian dollar loans are now priced over the Canadian Overnight Repo Rate Average, CORRA, which replaced the old bankers' acceptance and CDOR framework after CDOR ceased publication in June 2024. U.S. dollar tranches are priced over SOFR. The Bank of Canada held its policy rate at 2.25 percent at its September 2026 decision, below the U.S. federal funds rate, so the currency you borrow in affects the base rate you pay.
Cross-border facilities
Many U.S. companies with Canadian subsidiaries finance both businesses through a single facility with separate U.S. and Canadian borrowing bases. That can work well, but it raises questions worth settling early:
- Will Canadian assets support U.S. borrowings, or only Canadian ones?
- Which currencies can each borrower draw in, and how is foreign exchange handled?
- How will Canadian priority reserves be calculated, and how often?
- Are there tax consequences if the Canadian subsidiary guarantees U.S. debt?
- Will the lender need local counsel and separate field exams in Canada?
Lenders with real teams on both sides of the border handle these points routinely. Others may price in the extra work or limit what the Canadian assets can support.
ABL or a cash-flow loan?
For many Canadian companies the choice is between an asset-based revolving facility and a conventional cash-flow loan sized on a multiple of EBITDA. The right answer depends on the shape of the business.
Asset-based lending tends to suit:
- distributors, manufacturers and wholesalers with large receivables and inventory balances
- businesses with seasonal or volatile earnings, where an EBITDA-based loan would be too small or covenants too tight
- companies in a turnaround, where recent losses make cash-flow lenders cautious
- groups expecting fast growth, because availability rises with the asset base
A cash-flow loan tends to suit businesses with steady earnings and fewer hard assets, such as service and software companies, or those that want to avoid the reporting burden of a borrowing base.
The main trade-offs are reporting and covenants. An ABL facility needs regular borrowing base certificates, often monthly and sometimes weekly, plus periodic field exams and appraisals. In return, it usually has only a springing fixed charge coverage covenant that applies when availability falls below a set threshold, rather than quarterly leverage tests. Cash-flow loans have lighter collateral reporting but tighter financial covenants.
Some companies use both: an ABL revolver for working capital and a term loan from a different lender secured on equipment, real estate or a second ranking claim. That combination can release more total debt than either facility on its own, but it requires an intercreditor agreement setting out which lender has first claim on which assets.
Preparing for a Canadian ABL process
- Reconcile receivables and payables agings to the general ledger and clear old credits and disputed balances.
- Confirm all source deductions, sales tax and pension remittances are current, with evidence ready.
- List every location where inventory is held, including third-party warehouses, and whether landlord or bailee agreements are in place.
- Pull existing PPSA and Quebec registrations against the company and resolve any that are out of date.
- Break down receivables by customer, country and currency.
Kenward Partners works with Canadian banks, U.S. lenders active in Canada and specialty asset-based lenders. We prepare the collateral information lenders ask for and run a competitive process, so you can compare availability, reserves and pricing on the same basis.
Sources: Bank of Canada, Private credit in Canada, August 2026; Bank of Canada.
