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Basic Ways To Finance A Business In Canada
How To Finance A Business In Canada - that's a common challenge for every type of firm, from start up to an established growing business . It's no secret at 7 Park Avenue Financial that business owners and their financial mgrs often feel shackled when it comes to working capital, cash flow , and debt financing options . That's even when it comes to larger established corporations, let alone new clients we meet in looking for SME COMMERCIAL FINANCE options . ( SME = small to medium enterprise ).
Even more of a challenge is how the entrepreneur has to properly evaluate and recognized those options.
A good start ? Simply that one must differentiate between short term cash needs (that’s working capital by the way ) and long term debt and financing solutions . That short term cash flow we're talking about is the cash flow you use on a day to day basis to finance a business - those routine everyday parts of a business - payroll, purchasing supplier inventory, covering your fixed costs, etc!
Naturally if your cash flow is decreasing your firm is unable to meet the obligations you have to suppliers and lenders, including your bank of course, assuming bank financing is in place.
It all boils down to 3 reasons as to why your firm needs working capital ; first you might be a start up, secondly it's those firms that are growing more rapidly than they planned , and finally simply the inability to cash finance day to day business . That latter situation typically involves around the challenge of managing and financing receivables and inventory .
When it comes to smaller businesses in Canada, those that we referred to in the SME category it is not uncommon for banks and commercial lenders to place a good amount of emphasis on the owner personal credit history . As your firm grows it is therefore of critical importance to start properly positioning your company as a business borrower , one with borrowing power based on your balance sheet, income statement, and cash flow statement . By the way, sales and cash flow projections don't hurt also!
Many firms are often unwilling to take on debt, but the good news is that working capital and cash flow financing is often just a monetization of your current assets ( a/r and inventory ), as well as your sales. You don't want to over borrow on sales and assets, as that can typically lead to a false sense of security .
Therefore the best business line of credit ? One that fluctuates!! It's generally a negative situation if your line of credit for your company is close to ' maxed out ' all the time. That typically leads to the financial challenges we alluded to earlier - the inability of your company to run smoothly on a daily basis.
Incurring debt is of course not all bad. It makes perfect sense to borrow and incur debt outside the working capital needs - a good example might be the need for more equipment. Paying for a long term asset out of current operating capital is not recommended. If the equipment generates profits and has a longer term useful life you have made the correct financing decision.
WORKING CAPITAL OPTIONS IN CANADA :
In Canada working capital options range from traditional to alternative. A bank working capital facility will margin 75% of receivables and potentially, but certainly not always, a portion of your receivables. Larger firms have access to non bank asset based lines of credit that provide a very healthy margin of cash flow by utilizing 90% of your receivables and anywhere from 30-70% of your inventory.
There are some very effective ' subsets' of alternative financing such as a/r financing, factoring, confidential receivable financing . If properly used they can turn your company in an ATM like machine for cash flow and growth financing . Again, its all about effective mgmt and financing of assets such as a/r, inventory, and sales.
Other Alternative Financing Methods
Not everyone knows that you can cash flow SR&ED credits as well as financing purchase orders and contracts. Those 2 alternative finance methods alone allow you to maximize your r&d capital investment and take on larger orders, respectively.
Businesses who can properly represent themselves via their true financial position and growth potential should never feel shackled when it comes to working capital financing. Never ' over borrow ' and ensure you have access to the traditional and alternative financing options that allow you to run and grow your company.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success, one who can assist you in identifying immediate solutions... unleashing those shackles of the cash flow challenge .
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
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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