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The Not So Strange Disappearance Of Traditional Financing Solutions in The SME Commercial Business Sectors Of Canada
OVERVIEW – Information on working capital financing in Canada. Successful business credit solutions revolve around ensuring you are aware of the right types of loans and cash flow solutions available to your business
Working Capital financing is fast evolving into one of the most accessible forms of business credit in Canada. For firms that are searching for additional working capital either in a traditional or alternative for it's by far one of the best solutions for additional cash flow. Let's dig in.
Naturally business owners have alternate choices such as forms of debt and equity also, but when done properly cash flow type financing is by far a cheaper form when benchmarked against giving up more equity or putting long term debt on the balance sheet.
For permanent working capital solutions companies can choose between fixed and variable rates - it's always important to ensure you have a repayment schedule that meets your cash flow needs.
Permanent working capital loans are most often classified into two categories, intermediate, or long term. Intermediate tends to be 3-5 years, and long term in our experience tends to reflect a 7-10 year scenario.
While many facilities are sometimes back up by equipment collateral our focus here is the cash flow to back up your loan.
The two most common cash flow loans in many cases have fairly strict criteria and ongoing requirements from a financial performance perspective. If you business is smaller the loan can actually also specify the amount of debt that you as a guarantor, and your company also, can take on. Naturally in a pure cash flow loan the only collateral you provide as direct collateral is your firm’s ability to generate cash flow on an ongoing basis for repayment. This is more often than not referred to as ' mezzanine finance '.
Cash flow loans can be, on balance, the cheapest form of term financing in Canada. Working capital loans are provided by three types of entities in Canada, of course our chartered banks, a government funded crown corporation, and private independent finance firms.
The challenge for Canadian business owners and financial managers is simply to feel they understand the wide spectrum of this type of financing and to ensure they understand the degree of approval required by the three types of institutions we have mentioned.
What can you business use the working capital loan for? Our clients often focus on two areas, simply growth and cash flow, and, in many cases, acquiring another firm.
Clients ask for a simple explanation of what is required to get approved - quite simply the answer is that the loan focus is on credit capacity (your ability to repay), character and experience of you as owners/managers, plus the overall ability to demonstrate accurate revenue and profit projections.
The Canadian business financing landscape has dramatically changed in the last number of years, more specifically since the 2008 global recession. In many cases traditional financing sources such as banks have pulled back on financing all the needs of the start up , small and medium sized business sectors in Canada . Enter, stage left : Alternative Finance Solutions!
Niche types of working capital/cash flow financing can be derived from:
A/R financing / factoring / Confidential receivable financing
Inventory loans
Tax Credit Financing ( sr&ed )
Sale leasebacks
Asset based non bank lines of credit
Sales Royalty Financing
All of these forms of business finance can work either on their own, or are very often cobbled together to provide you with the capital and funding you need for your business.
In summary, properly constructed working capital financing solutions can make or break your firms overall growth and profit success .Speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success to determine if this type of financing meets your needs.
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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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
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