Quick answer: A loan against assets — also called asset-based lending (ABL) — is when a business uses owned assets such as equipment, trucks, real estate, or receivables as collateral to secure financing. Instead of relying solely on your credit score or financial history, the lender evaluates the value of your pledged assets to determine how much you can borrow.
What Is a Loan Against Assets?
For Canadian businesses, this is a powerful tool to unlock working capital without selling critical equipment or properties. At Mehmi Financial Group, we specialize in asset-based lending solutions that keep your operations moving while preserving ownership of your assets.
How Asset-Based Lending Works Step by Step
- Identify Assets
Assets can include trucks, trailers, machinery, commercial property, or even outstanding invoices. - Valuation
The lender appraises the assets’ fair market value. For example, a truck fleet valued at $500,000 may support a loan of up to 70%–80% of that value. - Loan Structure
- Secured Loan: Funds are advanced against collateral.
- Sale-Leaseback: You sell equipment to a lender and lease it back, freeing up cash.
- Invoice Factoring: Advance cash against receivables.
- Secured Loan: Funds are advanced against collateral.
- Funding & Repayment
Approval and funding timelines vary by lender, application completeness, and required conditions. You repay over time, with the lender’s risk covered by the assets pledged.
What Assets Can Be Used as Collateral?
- Transportation Equipment: Trucks, trailers, and vans (heavy-duty truck expertise)
- Construction Machinery: Excavators, loaders, cranes (construction equipment expertise)
- Manufacturing Equipment: CNC machines, forklifts, warehouse systems
- Agricultural Assets: Tractors, harvesters (farming & agriculture)
- Hospitality Equipment: Commercial ovens, freezers, POS systems (hospitality financing)
- Accounts Receivable: Invoices and freight bills
Advantages of Taking a Loan Against Assets
- Easier Approvals – Lenders focus more on asset value than on business history.
- Larger Loan Amounts – Funding tied directly to collateral value.
- Approval and funding timelines vary by lender, application completeness, and required conditions.
- Cash Flow Flexibility – Unlock capital for payroll, repairs, or expansion.
- Retain Equipment Use – With sale-leaseback structures, you free up cash but continue using your machinery.
Potential Risks and Considerations
- Asset Seizure Risk: If you default, the lender can repossess pledged assets.
- Higher Costs vs. Bank Loans: Rates may be higher than prime bank loans but offset by speed and accessibility.
- Valuation Gaps: Not all assets qualify at full market value; lenders discount to protect risk.
- Ongoing Monitoring: Some lenders may require regular reporting or revaluation of collateral.
Case Study: Unlocking Growth With Asset-Based Lending
A mid-sized logistics company in Brampton owned 10 trucks but faced cash flow issues after taking on new contracts. Banks turned them away due to existing debt.
By working with Mehmi, they used asset-based lending, pledging their fleet as collateral. They unlocked $400,000 in working capital, which was used to hire drivers and cover fuel costs while waiting for customer invoices to be paid.
Within six months, revenue rose 30%, and the loan was refinanced at better terms once cash flow stabilized.
FAQ: Loans Against Assets in Canada
1. What is the typical loan-to-value ratio in asset-based lending?
Usually 60–80% of the asset’s appraised value, depending on type and condition.
2. How fast can I get funding using my equipment as collateral?
Approval and funding timelines vary by lender, application completeness, and required conditions.
3. Can startups qualify for asset-based loans?
Yes. Startups with valuable assets (like trucks or machinery) often qualify even with limited credit history.
4. Do I lose ownership of my assets?
Not necessarily. With a secured loan, you retain ownership. With a sale-leaseback, ownership temporarily shifts, but you still use the equipment.
5. What happens if I default?
The lender can seize the collateral, so repayment planning is critical.
6. Is asset-based lending more expensive than bank loans?
Typically yes, but it’s much faster and accessible for businesses banks won’t approve.
Final Thoughts
Taking a loan against your assets is a practical way to unlock liquidity, especially when traditional financing is out of reach. By pledging equipment, vehicles, or receivables, Canadian businesses can fund growth, cover payroll, or bridge seasonal gaps without selling core assets.
At Mehmi Financial Group, we help companies across transportation, construction, manufacturing, and more structure asset-based financing that works for their needs.
Run your numbers with our calculator or contact us for a personalized quote.
Authoritative references
- Innovation, Science and Economic Development Canada — Canada Small Business Financing Program:
The Canada Small Business Financing Program makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders.
Program eligibility, lender criteria, tax treatment, and product terms can change. Verify current official guidance and final financing documents before making a decision.
Source perspective
BDC’s equipment-financing guide emphasizes the complete financing structure when comparing offers.
“Don’t focus only on interest rates”
For the equipment decision discussed here, compare the amount financed, payment schedule, collateral and remaining obligations alongside the quoted rate.