Is Your Business Financing In The Spectacularly Appalling Category ?
OVERVIEW – Information on business financing solutions in Canada . Numerous working capital financing and cash flow challenges can be solved with the right funding solution - Here's why and how!
Business loans in Canada, for some business owners / financial mgrs must seem ' spectacularly appalling' sometimes. How then can your company reverse that ' leap backward' feeling when it comes to working capital financing and cash flow solutions? We've got some answers, so let's dig in.
When sourcing business loans two key factors come into play -
Is the need for additional financing?
Is a re-financing strategy in fact required?
There's no question the current borrowing environment makes it challenging for business owners and financial managers to often access the right amount of capital they need. No secret there.
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 and debt 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
Monetize current assets such as A/R and inventory into a permanent business credit line
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.
Ever wondered what category you're in?!
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 known 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
Other ' cash flow ' or ' debt ' solutions you might also consider include:
P O Financing
Equipment Leasing
SR&ED Tax credit bridge loans (if applicable to your R&D capital strategy)
Royalty Finance
Canadian Govt Small Business Guaranteed Loans
We encourage customers to think around the terms traditional financing and nontraditional 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 buildup 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. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding requirements.
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
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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ABOUT THE AUTHOR
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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