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Sources of Business Finance In Canada
Financing sources in Canada for Canadian business must seem sometimes as if it's a matter of truth or fiction for Canadian business owners and their financial mgrs. That certainly the feeling we get from clients talking to us at 7 Park Avenue Financial .
So if those sources of business finance exist ( THEY DO !) let's take a look at what is available for the commercial borrower, hopefully eliminating some of the ' turbulence' associated with the search for business funding.
Sources of Business Finance
We will focus primarily on sources of capital that essentially are available immediately for borrowers - they include:
Trade Credit From Suppliers
Bank Solutions
Equipment Lessors
Working Capital Providers - A/R Finance / Inventory Finance / Purchase Order Finance / Short and Intermediate Term Working Capital Loans
Businesses should never forget that supplier/vendor financing is one of the best and cheapest forms of capital and cash flow. Why ? Quite frankly it is much easier to obtain, is rarely, if ever ' secured' or ' collateralized ‘and typically carries no interest penalty
You should not forget that delaying payment to suppliers is a ' cash flow positive ' , but, and it's an important but, you never want to have that strategy deteriorate the relationship you have with a key vendor. Furthermore if your firm has the cash the cost of not taking a payment discount also must be measured .
So why is prompt payment to a supplier/vendor such a key cash flow / profit variable ? You can check with your accountant but let’s say you bought 10k of product from a supplier and were able to successfully negotiate a 2% NET 60 payment term. Calculating the discount foregone and the proceeds from the use of the money you might find that’s an 18% savings rate -so if you can borrow for less than that you clearly are ahead of the game. Bottom line - never underestimate the power of supplier financing from a payment and cash flow perspective.
While banks might be consider as a first choice ' go to ' when it comes to financing sources under consideration many firms looking for ' SME ' Commercial Finance solutions will often find they don't qualify for some of all of the funding they need to run and grow the company .
Business lines of credit from banks are low cost and flexible - but they require require appropriate bank collateral and the understanding from yourself that there might be some restrictions on your financials re additional borrowing from others, etc. If your company meets cash flow and ratio and covenant requirements from banks they are certainly the lowest cost and excellent source of intermediate capital for loans on equipment, fixed assets, and a revolving line of credit.
One of the most popular forms of finance , growing constantly in popularity, is A/R financing . Why? Simply because it provides significant capital without additional equity and allows you to avoid long term debt. Essentially you are monetizing your current assets, ie receivables .
Yes a/r finance has a higher cost, and we spend a lot of time in speaking to clients around the fact that the old stigma of A/R factoring disappears more and more every day. The old alternative is fast becoming the new traditional!
The benefit of A/R Finance also includes that fact that your sales in effect become an ATM machine, generating true cash as you sell products/services. This type of business finance also is an effective way to manage seasonal bulges in your business.
Inventory financing is typically done in combination with a bank line of credit, but is even more effective when in conjunction with a non bank asset based line of credit.Good inventory financing strategies are available if your firm has quality products; good inventory turns, and is not of a perishable type - i.e. food.
Equipment financing is a solid use of intermediate financing. It allows you to avoid large cash outlays, replenish assets and technology, is easier to obtain from a financing approval point of view, and allows you to simply pay for assets over their useful economic life. A huge portion of all businesses in North America lease both new and used equipment .
The bottom line in Canadian business financing options ? You can eliminate the turbulence that comes with business finance challenges by understanding what sources are available for what maturity. Simple as that.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success , assisting you with your needs for financing sources in Canada to run and grow your company.
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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