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Working Capital Loans In Canada : And This Isn’t Just Locker Room Talk !
OVERVIEW – Information on working capital loans in Canada. Successful business financing will always require the right cash flow and capital solution that matches your companys' needs
Working capital loans in Canada have the ability to provide the cash flow & business financing solution your business needs to achieve overall funding success. Let's look into these real world funding solutions you can access, and let's dispense with any ' locker room talk ‘!
True cash flow loans (there are numerous variations) come with attractive rates at the expense of not having to issue or generate additional owner equity. Let's dig in.
Real working capital term loans come with a typically 3-5 year short term /intermediate term focus. Typically payments are made monthly out of the cash flow your company proves it can generate on a regular basis. In essence the solution is one that’s a permanent working capital solution to your overall capital structure.
In some cases a true working capital loan can have some collateral attached to it such as equipment or other business assets, but typically it's all based on your ability to prove consistent and positive cash flows.
These type of facilities are made through 3 types of organizations-
Chartered banks
Independent Finance Companies
A Government owned Crown Corporation
Achieving success in a working capital loan scenario will come with some conditions, as business owners will normally be required not to take out excessive funds from the business, and must be able to demonstrate that they have the cash flow in place to repay the loan, as we've stated.
The lenders challenge in a cash flow loan is their need to ensure your current and projected funds can meet your repayment requirements.
Only a small handful of organizations that typically provide such business financing in Canada. Canada's chartered banks provide the lowest rates, while other firms and organizations have a higher cost of borrowing which is passed on to your firm as the borrower.
Why should your firm consider a cash flow solution? The typical reasons might be capital improvements, equipment purchases, and working capital to support investments in receivables and inventory.
It is important to ensure you are entering into a working capital loan arrangement for the right reasons - as working capital loans should not be confused with asset based lending on items such as receivables, inventory, equipment, real estate, etc .
Typically a working capital facility loan will require the guarantees of the owners of the firm. One of the smartest things you can do in positioning a facility such as this is to provide a crisp well thought out cash flow analysis - (an updated business plan wouldn't hurt), to give the lender the comfort that you can make payments. In your document you should know that the lender will be looking at total debt to equity once the loan is in place, and also that you have cash flow coverage to repay.
In our experience with clients working capital requests tend to be in the 50k-250k range. Larger facilities than this become known as mezzanine debt, or subordinate debt - these are fancy terms for 'unsecured cash flow loans '.
In recent times numerous alternative finance solutions have emerged to address the working capital challenge. These solutions include:
Short term working capital loans/ merchant advances
Factoring
SR&ED Loans
Sales/Royalty Financing
Sale leasebacks
In summary, working capital loans are available in Canada from various entities. It is important to position your request properly, and careful attention to the metrics that the lender will be looking at will pay off for your firm.
Speak to a trusted, credible advisor in business financing who will help you maximize the benefits of a true working capital loan facility or alternate solution that makes sense for your business or industry.
Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com
7 Park Avenue Financial
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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