Sources Of Canadian Business Capital And Debt Financing

Financing Solutions For Growth ( And Survival ) In Canada


Information on sources of business capital in Canada . The proper choice in equity and debt financing helps guarantee success for Canadian business owners / managers





Businesses that are growing require sources of capital. The capital in a company of course comes from the owner or borrowed funds. Generally speaking business owners prefer to borrow rather than sell equity in the company, as that sale of equity dilutes the ownership position, i.e. they own less of the pie!

Debt vs. Equity


New equity can come from friends and family, venture capital firms, and angel investors. These parties are looking for good management, integrity, owner financial stake, and growth potential.



However, in the current difficult financial environment many lenders are in fact insisting that business owners put more of their own money into the company. There is never an easy answer when it comes to the debt or equity question.

When businesses borrow funds there is a cost to that capital - as interest on that debt reduces over-all profits. New equity in the company of course does not reduce those earnings, however the profits are distributed more widely and the earnings are proportionately reduced.


Borrowing funds of course comes with risk, as those loans must be repaid. Business owners sometimes get caught in the trap of financing long term projects with short term money - they are therefore at the mercy of having to always roll over that debt, and potentially also seeing rates go up, sometimes dramatically. Also, a business can carry only so much debt, at which point cash flow becomes a potential problem if the company is over leveraged.


Currently rates are very low for businesses that have access to capital. Therefore in many cases it might make sense to lock into longer term loans in the current attractive rate environment.


When the business owner has made the decision to purse business loans the old Boy Scout model works very well - BE PREPARED! Business owners that do their homework will usually be successful. Lets not forget the banks and finance firms are actually in business to loan funds. Naturally collateral, or additional collateral certainly improves the chances of debt financing success and loan approval.


Debt and equity financing as a sources of capital should be used for the right reasons - expansion, seasonality of business, increased inventory and working capital that will increase sales. Funds that need to address business inadequacies such as poor management, financial losses, falling sales, etc are very difficult to come by!




Solutions for debt capital include :

Real Estate / Asset Leasebacks
Bridge Loans
Term Loans
Government Loans
Unsecured Cash Flow Loans/sub debt


Additionally assets can be monetized without the necessary addition of debt ; These include:


Receivable Inventory Financing ( or combinations thereof )
Supply chain financing
Royalty finance
Tax Credit Monetization

In summary, business owners should carefully consider the positive and negative effects of additional debt or equity capital. Once they have made an informed decision, either on their own or with a credible, experienced and trusted Canadian business advisor they should consider the cost of that capital and how it is best achieved.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS CAPITAL EXPERTISE




Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/business_capital_debt_financing.html