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The best business loans and Canadian business financing options for business owners and financial managers aren't always the obvious ones when it comes to achieving capital needs for your company. If there is any good news in today's highly competitive business environment it is that funding options and a loan alternative are available for everything from startups, growing businesses, as well as financially challenged firms.
Why Is The Use Of Alternative Finance Growing In Canada
Three reasons by alternative lending is booming in Canada :
1.Credit Restrictions from Canadian Chartered Banks
2.Demand for Funding That Is More quickly Accessible and attuned to industry needs
3.Increased Knowledge Around Benefits of Alternative Finance - Studies show that Canadian business borrowing in the past was somewhat skeptical about dealing with non ' bricks and mortar ' financial institutions, but that is changing quickly.
In fact industry statistics from organizations such as the IVEY SCHOOL OF BUSINESS/UNIVERSITY OF WESTERN ONTARIO advise that 867 Million dollars of alternative capital were borrowed via non bank lenders for figures available just a few years ago.
Constant changes in the economy, ( pandemics included !) make it difficult for companies to access the business capital they need. Mainstream financing via Canadian banks etc is not always available when you need it, and alternative methods of financing and the ability to get a commercial loan in canada have almost become an imperative for business owners and their financial managers to inspect.
It is no secret that many industries have unique financing requirements, and even within industries, no company might have the same needs - hence our focus on ... options!
So what in fact drives the need for financing? It typically comes down to the longer-term goals of your company, the size of your business, and the overall 'risk rating' that both traditional and alternative lenders use to provide their capital to your company.
KEY POINT - When it comes to SME COMMERCIAL FINANCE options at 7 Park Avenue Financial e strongly recommend that business owners separate their business and personal credit. Although traditional banking does, in fact, focus on the reflection of your personal credit history as a measure of how you will handle business affairs it is still appropriate to have commercial lenders draw on credit info from business credit bureaus such as Dun and Bradstreet - building business credit and being able to demonstrate proper financials and a business plan and cash flow projections goes a long way to business financing success.
Business owners typically gravitate to term loans - it's a common form of loan that at its basics requires you to make monthly payments over a pre-determined period - typically 2-5 years. These days many clients we speak to are looking for short term working capital loans, typically covering temporary shortfalls or unique situations. These loans are very popular, readily available, and even more good news, quick to close, often in a matter of a week or two.
Those short term working capital loans and financing loans compete directly these days with traditional banks, who of course have better rates but harder approval criteria. Often no hard collateral is required, just the 'promise' of the business and business owner to pay. Typically these loans are for 10-20 percent of your annual sales volume, as a guideline to keep in mind.
Government guaranteed start-up loans are also popular. The government is committed to billions of dollars in these loans every year in Canada. Repayment is long, and covers 3 assets you can finance - equipment, leaseholds, and even real estate! The downside - those great rates and terms and flexibility come with an application process that can be cumbersome if you don't have the expertise of an experienced Canadian business financing advisor.
Businesses run day to day on credit lines, typically secured by receivables and inventory. Asset based lenders provide non-bank lines that offer generous borrowing margins.
Other Alternative business financing and immediate sources of business funding include:
Short Term Working Capital Loan ( Also called 'MCA's or Merchant Advances )
These loans are usually very quickly available with the main criteria for approval focusing on your years in business and loan amounts geared to your annual sales, typically in the 15-20% range. The personal credit history of the owner/owners is also a data point considered for funding. Loan repayments are typically spread out over a year and are often customized to your cash flow receipts from cash and business receivables. Interest rates are higher but flexibility and quick access to capital is the key benefit . Those are often the key benefits to any alternative lending solution .
Receivable Financing
A/R financing is a mainstay of alternative business financing. Financing is based on a high percentage of your receivables, typically 90% which is significantly higher than Canadian bank receivable margining policies. Rather than an ' interest rate ' per se commercial receivable finance funders charge a fee, typically in the 1.5- 2% range.
Firms with good gross margins who can easily absorb a 1-2% reduction in their profit margins can find themselves virtually becoming an automatic cash machine as they generate cash at the same time they create and grow sales revenues. It is generally improper to compare this type of financing to a bank business loan as the interest rates and fees are not a ' apples to apples ' comparison.
Receivable financing facilities can be stand-alone, or combined with other financing, such as an asset based line of credit that allows you to borrow under one facility based solely on your assets and sales. At 7 Park Avenue Financial we recommend that is a sole stand alone facility is used a CONFIDENTIAL RECEIVABLE FINANCING solution be implemented, allowing you to bill and collect your own receivables while reaping all the benefits of a/r financing/factoring.This financing is not a working capital loan that brings debt to the balance sheets, it's simply a monetization of your current assets.
Note that you can even finance a business purchase with an asset based loan.
Purchase Order funding / ABL Asset Based Lines Of Credit - These credit line and sales financing solutions are focused on business sales revenues and current and fixed assets. Much less reliance is placed on balance sheet ratios, covenants, outside collateral, personal guarantees, etc, often demanded by more traditional lending institutions.
Equipment Leasing / Equipment Loans / Sale leasebacks
Equipment loans and lease financing solutions are utilized by the majority of North American businesses to acquire both new and used assets. Business owners are sometimes surprised that used assets can also be financed, as long as they are acquired from another business or distributor, not via a ' private sale '. Business borrowing via Sale leasebacks can generate working capital for assets your firm owns outright, including real estate.
Equipment lease approvals are based on your ability to meet the monthly payment with respect to your cash flow, as well as being able to demonstrate the asset financed is a benefit to your business. The asset/equipment is of course the main collateral for the le assets. It is often recommended that you discuss with your accountant the lease vs. buy and the lease vs. loan business financing decision.
Government Of Canada Small Business Loan Program - Small Business Loans Canada
Although a mainstay of traditional banking many business borrowers are not familiar with the program and have a challenge in locating a banker who will work with them on this government-guaranteed loan. The formal name for the program is the Canada Small Business Financing Program
and allows small businesses, including startups to get 'traditional bank loans ' based on a guarantee the federal government, via INDUSTRY CANADA, provides to the banks.
Loans are up to $1,000,000.00 which is hardly ' small ' and over the last decade over 60,000 loans have been made under the program. Any new or established businesses under 10 Million in revenue can apply. AT 7 Park Avenue Financial we work with clients to ensure a speedy approval without missteps typically associated with bank borrowing - so we work with clients on a business plan, cash flow, company history, management overview, etc.
That business plan and other info help assure a speedy response and approval. Business owners borrowing under the program must have a decent credit score in the 650 range per Canadian credit bureaus such as Equifax.
It is very important to note that these ' SBL ' loans ' can only be used for equipment and leasehold interests and real estate. Unlike the U.S. counterpart in the U.S. it is only focused on those 3 asset categories and can't be used for cash flow, working capital, r&d, inventory, etc. Loans to buy a business in Canada are often utilized under the Govt SBL program.
Many franchise financing needs work very well in this program. As well rates are comparable with Canadian bank interest rates and terms vary from 2-5 years. A business start up loan is often the best way to utilize the program.
Statistics show that more and more Canadian business owners are understanding the various business finance options available to them. As opposed to taking to numerous commercial lenders it makes more sense to talk to a proper business advisor around types of financing, costs, and conditions. Canadian business has been somewhat slow to adopt alternative financing compared to ur U.S. counterparts but for those willing to investigate options there are numerous opportunities to finance your growth and operating needs.
Similar to bank loans for businesses and other mainstream financing alternative funding sources all have their benefits and potential drawbacks if not accessed properly, and for the right reasons - so investigate the options that best suit your firm's immediate needs. Seek out and speak to a trusted, credible, and experienced Canadian business financing advisor with a track record of success.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Click Here For 7 PARK AVENUE FINANCIAL website !
7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.
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. He is an experienced
business financing consultant
.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 financing 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.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2020
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Click Here For 7 PARK AVENUE FINANCIAL website !
7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.
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. He is an experienced
business financing consultant
.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 financing 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.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2020
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