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Alternative Financing Options For SME Commercial Finance Needs
Alternative financing options and sources is all about the right capital and cash flow from sources you can depend on to grow your company's sales and profits.These lending options tend to come with fast approvals although non bank lenders demand a higher rate of return based on the flexibility of their capital and the eligibility requirements .
Any current economic upheaval notwithstanding, it's safe to say that after the 2008-2009 recession businesses in the SME ( small to medium enterprise ) sector in Canada had greater difficulty in obtaining proper traditional bank financing . The ability do do business and raise business credit had many firms wondering what the commitment was to this key segment of Canada's economy.
Bank lending guidelines focus on key elements such as accountant prepared financial statements, personal guarantees, outside collateral, and performance ratios / covenants your company must abide by . That can be a challenge.
Alternative Financing Canada
The business line of credit is typically a major necessity for any company . when access to credit lines dry up your company is more often than not able to support ongoing sales and daily operations.
So what can small and medium sized businesses do ? Whether its start up funding, or growing a business the landscape of Canadian business financing has changed. Experts tell us that the reasons alternate capital sources are growing is a combination of regulations in commercial lending and technology. Many new lenders can provide access to financing previously only offered by Canadian chartered banks.
While in some cases banks are pulling back to certain types of lending new technologies and many new commercial finance companies are providing complementary financing to run and grow business.
At 7 Park Avenue Financial we talk to new clients about the differences and benefits of traditional versus alternative finance solutions . Many firms have to utilize non-traditional business credit and business loans.
Though these sources of credit may not be perfect for every business, they are at least options to keep your company going through rougher economic times when you have been, as the saying goes ' de-banked'
Alternative Sources of Business Loans
Asset based loans - These facilities rely heavily on the hard collateral in your business, typically equipment, rolling stock, real estate, etc.
Non bank revolving credit lines - These business credit lines, often called ' ABL's " are used to manage the cash flow gaps that arise out of the need to carry inventory, collect receivables, pay employees and suppliers, etc. Similar to bank lines the carrying cost is calculated on the ongoing balance . The best way to operate these type of facilities is to make sure they ' revolve ' - hence the term ' revolving line '.
Another key benefit of the non bank asset based line of credit is that they can easily be increased as your sales and working capital needs grow.
Inventory Loans - Using inventory as collateral is often best facilitated in the context of the asset based credit line . The facility combines inventory and a/r financing to create an important source of ongoing cash flow.
Sale Leasebacks - Equipment your firm owns can be leased back to create valuable working capital,with your firm still maintaining full use of the equipment.
Equipment Financing - 80% of all North American businesses ( that includes Canada !! ) utilize lease financing to minimize capital outflows for new and used assets. Yes, used equipment can be financed !
SR&ED / Film Tax Credit Financing - Tax credits for the Government Scientific Research and Experimental Development program can easily be monetized to recoup valuable investments your company makes in R&D
Receivables Financing / Factoring - The ability to cash flow your receivables on an ongoing basis is one of the fastest growing parts of the alternative finance area . Our recommended solutions to clients of 7 Park Avenue Financial is Confidential Receivable Financing, allowing your firm to bill and collect your own a/r and be able at the same time to cash flow sales immediately as you generate revenues.
Royalty Finance - Royalty finance is quasi form of equity financing and allows your firm to raise funding based on sales
Purchase order financing - P O Finance is similar in many respects to a/r financing, but takes the whole process one step further , allowing the P O lender to pay your supplier for products related to legitimate purchase orders / contracts.
Working Capital Loans/Cash Flow Loans - Technology has allowed many firms to apply to short term working capital lenders who offer loans, typically 12 months in duration based on only your sales volumes. This type of financing is a key part of the whole wave of what the experts call ' FINTECH '. These loans fill a short term void and are typically based on loan amts equivalent to 10-15% of your annual sales volume. Other names for this type of loan is ' peer to peer / B2B ' financing.
These shorter term working capital loans/advances arose out of Merchant Advance industry in the U.S. , having spilled over into Canada . Those loans, called " MCA's " typically work best for retailers . In effect this area is a ' shake up ' of ' old school ' traditional financing. While these solutions are available to both public and private companies the majority of these types of financing revolve around private firms who want to both survive and grow their business.
We're not 100% sure that banks are abandoning small and medium sized lending - although many of our clients certainly feel so! But post the 2008 global recession it's safe to say business financing in Canada has changed. That's why the amount of capital available via private alternative finance firms should be often appealing to business owners and financial managers.
To explore the numerous capital and cash flow sources available via commercial alternate finance sources seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success, who can assist you with business loans that makes sense for your company / industry.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
