Small Business Loans for Working Capital Financing In Canada

If your firm is looking for what is commonly known as a ‘ Small Business Loan ‘ it is critical to focus on two major issues –

1. Are you looking for additional financing

2. Are you looking for new Financing, aka ‘ re financing ‘

The current overall economic environment makes it challenging for business owners and financial managers to often access the right amount of capital they need.

When we talk to client’s discussion tends to revolve around what type of financing they require, and as a business owner you should understand the options and benefits that come from various types of working capital financing.

A good way to address the issue is to simply focus on why you feel you need the additional capital. Reasons might be as follows – refinancing existing debt, leasing new equipment, or, if we use the true meaning of working capital, to further monetize current assets such as A/R and inventory. You need all the help you can get in assessing those needs and the benefits that arise from them – as a result we recommend you work with a credible, trusted, and experienced advisor in business finance.
For ongoing working capital needs you are either in Category one or two-

Category 1 – You have a bank relationship but can’t access the true amount of financing you need

Categories 2- You can’t and haven’t accessed traditional financing, are self financing, and require additional capital to maintain and grow your business.

If we get straight to the heart of the matter for options for working capital financing are as follows:

- a working capital term loan

- additional bank operating facility

- a true asset based lending / working capital facility – ( this is a non bank facility)

- Receivable discounting, also know as factoring your receivables

- Inventory financing via a supplemental inventory loan ( this traditionally works best when it is combined with a receivable facility

- Sale leaseback options to release working capital in assets

We encourage customers to think around the terms traditional financing and non traditional financing. If you are thinking of exploring traditional financing with a new or existing bank then you should anticipate, in our experience, at least a 1-2 month timeframe. This might not be suitable for your timing purposes if you have increased payables to address, or new orders and contracts which require a build up in A/R and inventory.

If timing and increased working capital are your priority you should consider an interim solution to the always long term problem of business financing – that solution might be a working capital facility from a private finance firm, one that provides you full margining of your receivables and inventory .Typical entry advances for a/r and inventory are 90% and 40% respectively, and if you work with the right partner that specializes in inventory financing then you can even enhance those ratios . All that simply means is more working capital! One point of confusion that we like to clarify with clients is that the government small business loan program finances only equipment, leaseholds, and real estate, i.e. hard assets – as such this program should not be confused with a true working capital solution .

So what is our bottom line for small business loans (unsecured) and working capital financing .It is simply that you must realistically recognized the commercial lending landscape has changed:

Traditional financing is harder to access

Collateral requirements and guarantees are at a higher bar for approval

There are alternative methods to securing working capital financing – these might come at a higher cost, but should in most cases provide you with the cash flow you need to effectively run and grow your business.

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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 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/small_business_loans_working_capital_financing.html