The New Shape of Business Financing and Commercial Lending Options in Canada

A Mini White Paper On Canadian Business Financing

Information on the state of Canadian Business Financing and commercial lending . Who is offering and competing with who and what types of options are available to Canadian companies seeking asset and working capital financing .




Turmoil in economic times presents all sorts of challenges for Canadian business owners and financial managers. As challenging as business financing has become so called ' tougher times' a new breed of financing services and players in Canadian business financing offer new and different types of financing for business needs.

Most people would agree that the Canadian chartered banks had what we could call the protective turf in Canadian business financing for many decades. Our observation? Boy has that changed, and new dynamic and innovative offerings are available for every type of business, from start up to large corporation.

A good way to thing of business financing in Canada is simply by thinking of the offering as either from a regulated player, or a non regulated player. Banks are a good example of regulated players, while firms such as equipment finance companies or asset based lenders tend to be unregulated.

Types of financing that might have been unimaginable in older times are now viewed as new and extraordinary relative to business financing needs.

Many larger industrial corporations - i.e. G.E, G.M., etc. have in fact become major players in Global and certainly Canadian financing. Commercial lending and financing is no longer of course just offered by Canadian chartered banks. In Canada it is some major insurance companies and pension funds that are the ones funding the Canadian equipment financing industry.

Different financing firms have different niches, but in many cases competition has become fierce and it’s quite often a challenge for the companies seeking Canadian business financing to differentiate from who is offering what.

When we think of the financing needs of larger companies in Canada we can be forgiven for thinking that this is the real bread and butter of bank commercial lending in Canada.

Captive finance companies also provide a significant amount of financing in Canada. They play a significant role in many transactions that otherwise might not be able to meet more stringent bank criteria. The good news is that many captive finance firms have branched out in Canada to offer inventory financing, purchase order financing, asset based lending, and equipment finance - not just for their parent companies, but for a large measure of Canadian business. And that’s a good thing!

When Canadian business has a strong knowledge of both the finance offering and the competition for that offering that leads to better rates, terms and structures for your firm, the borrower.

Canadian banks , viewed as the strongest and best run in pretty well the whole world haven’t necessarily stood around watching their business financing and commercial lending decline . They have expanded into the U.S., purchased independent commercial lease financing and auto financing firms, and rebranded these firms into their own offering.

Many smaller companies in Canada, those ranging under 5 Million dollars in revenue utilize independent commercial receivable financing firms, known as ' factors' to finance their working capital needs. The need for this and other types of creative financing is huge because of the general strict credit criteria of the Canadian chartered banking system.

Other non bank financing services in Canada generate premium pricing for the companies offering these services. We think they do this by paying more attention to the real needs of Canadian firms seeking commercial lending. When asset based lenders or receivable and P.O. factoring firms have the right discipline they have proved themselves to be very successful and strong competitors of the Canadian banks.

Canadian non bank finance firms have a number of nonproprietary finance offerings that allow premium pricing, and servicing the SME (small to medium enterprise) sector provides strong growth opportunities.

So how does the ever changing Canadian business financing landscape affect you, the potential borrower? The bottom line is that a variety of finance offerings allow you to maintain an open door to get the maximum amount of financing your firm needs. Smaller firms have the ability to use lease asset financing, receivable financing, tax credit financing, purchase order financing from a variety of competitors.

Take hands on approach to your finance needs by speaking to a trusted, credible and experienced Canadian business financing advisor who can help you manage the relationships you need to have in place to access business financing options that make sense for your firm.



ABOUT THE AUTHOR -

Stan Prokop
7 Park Avenue Financial
www.7parkavenuefinancial.com