Confused About Financing Costs And Rates ? Here’s The ‘ Skinny’ On Business Loans And The Real Cost Of Finance

Canadian Business Financing - Rates, Costs and Implications


OVERVIEW – Information on the cost of finance in Canada . Financing costs, either rates or implications of business loans and asset monetization play a critical role in the business decision




Financing costs and ' rates’ re: business loans are top of mind for Canadian business owners and managers searching for some sense of stability and reliability in running their business as bench marked against the cost of finance. Let's share some ' skinny '

around these issues.

A good place to start is to give some solid thought around whether your financing will cover off the current need, and take you into the intermediate and long term when it comes to growing or expanding your business.

There are about 6 ways to ensure your business has the short term financing you need. Let's look at some of them... with a focus on ... COST!
The average business owner can be forgiven for not viewing their supplier as a form of financing, along with considering the benefits and costs around this continual relationship.

Let's use the example of a supplier who offers your firm payment terms of 2/20 net 60. That of course means that you can pay them in 60 days, or takes a 2% discount if you pay in 20 days. If you use a sample $ 10,000.00 invoice the arithmetic around that transaction will tell you the opportunity cost of not taking that discount is almost 19%!

By the way... Opportunity cost? It's the cost of passing up the next best choice when making a decision.

In Canada bank loans offer the lowest cost of finance when it comes to business borrowing. In the current low rate environment of 2012/2013 typical borrowing rates are in the 4-5% range. The challenge in Chartered bank facilities is getting approved, as well as ensuring you have the right facility in place. Those include: unsecured cash flow loans, business credit lines, installment loans and term loans for the purpose of asset purchases.

Probably the best advice we can give clients in reference to bank loans and their costs is to simply understand the alternatives, especially if you either don't qualify or are in the position of having your loan called. I.E. The Special Loan scenario!

A lot of the financing that banks provide in Canada can also be achieved via commercial finance firms. While rates might be higher and more emphasis is placed on collateral you can often achieve all the financing your firm needs. By the way, why are rates higher from commercial finance firms? Probably because they get their funds from the bank!

Receivable financing in Canada is more common place everyday. Many misconceptions exist around financing costs associated with ' factoring ‘. It's also important to remember that A/R finance allows you avoid long term debt and giving up equity - those are important considerations. If you understand the miscellaneous charges, the advance rate, and the discount rate on Receivable Finance in Canada you may well embrace the benefits, which are:

Immediate cash flow
Bulge financing
Growth potential
Strengthened balance sheet


Two other subsets of short term financing in Canada are Inventory finance and Leasing. Inventory finance is generally done within the context of an asset based credit line, which comes at higher than bank rates.

Leasing/equipment financing in Canada offers competitive rates for all asset classes commensurate with your asset class and overall credit quality. The industry has a solution for every asset, and rates from 4-24% cover the spectrum of asset financing in Canada. While you will probably pay more for leasing than a bank term loan the appeal is staggered cash outlays, obsolescence protection and fewer financial covenants /restrictions.

So our bottom line today? Simply that each category of financing required comes with a different measure of cost, risk, liquidity and in many cases, restrictions. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with the cost of finance for your business.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS FINANCING 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 10 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/financing-costs-cost-of-finance-rates-business.html






7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com

















Stan Prokop