Tweet
SME Finance, (that’s ' small to medium enterprise ‘), aka ' small business finance ' , in Canada no doubt requires a fix (or fixes?) of some sort. Getting a tailor-made business financing solution for the loans and cash flow solutions you need is not easy, but where there's a will there's a way. Let's dig in.
Alternative financing solutions for small business lending are a new and appealing part of the Canadian business landscape.
These solutions are of course available to any firm, both public and private, but we're quite sure the majority of firms that use these solutions are privately held.
At a certain point in time, business owners come to that turning point where equity no longer works and debt or cash flow solution decisions around a company loan must be made. Now ' leverage ' seems to make a lot more sense than equity dilution.
Monetizing assets for cash flow, as well as securing working capital allows your firm to consider growth projects to enhance both sales and profits. In some cases you might be making investments in new marketing strategies, in other cases your company might be investing in research and development. ( Don't forget to check out the Canadian Governments SR&ED Program - and by the way, you can finance those SRED Tax credit refunds !)
Many businesses find themselves in unexpected situations where they have maxed out on the liquidity available to them from current lending sources. That is the time to consider either cash flow or asset monetization solution. Cash flow solutions are best suited to firms that are unable to offer up additional collateral to lenders. They also place much less emphasis on the proverbial ' personal guarantee ' required by almost all lenders when it comes to borrowing in Canada.
Working capital loans come in two flavours - short term loans that typically are repaid in one year, and of course longer-term loans that typically have a maturity of 3-5 years, and sometimes longer. These short term loans have become very popular with thousands of firms, and are a spin-off of the ' merchant advance ' industry which flowered in the United States and then moved into the Canadian domain.
Whether its a short term loan or one that matures several years out a good lender will work with you to tailor repayments based on your current cash flow inflows.
The danger in working capital type loans comes from how these funds are deployed - typically shorter-term loans should be used to augment your day to day working capital, and they should not be invested in asset procurement/capital asset purchases.
Working capital loans make sense if you have good sales; many firms use this financing simply because they are growing too fast and traditional chartered bank financing is not available. In certain cases, companies may wish to capitalize on short term opportunities that have arisen around inventory volume discounts, or large orders received from new or existing clients.
All businesses that sell on credit carry receivables, and there is a cost to that, as the buildup of both a/r as well as inventory places pressure on the investments you carry in receivables and inventory as sales grow. That's why it is important to focus management on good inventory turnover as well as the prompt collection of receivables, leading to a better ' days sales outstanding - DSO '.
Alternative finance for a small business capital loan and asset monetization from financial institutions is almost always more expensive than bank debt. But from the owner/entrepreneurs point of view working capital and cash flow cost far outweigh equity /ownership dilution - especially for growing firms with promise.
Let us not forget also that even established firms with relatively good financials often can't ' tap ' the financing they need. And going the VC/Private Equity route makes sense only for the smallest % of Canadian business
WHAT COUNTS AS COLLATERAL FOR A BUSINESS LOAN?
Typical collateral for a business loan in Canada revolves around accounts receivable, inventory, and fixed assets. When dealing with a senior lender for business capital they will typically collateralize these assets for securing the loan/financing.
So what are in fact some of those ' tailor-made' solutions that might be highly applicable to your business finance needs when it comes to small business loans and business lending Canada
What types of business cash flow loans can a business use to finance their business?
Factoring
Confidential Receivable Financing
Inventory loans
Bridge loans
ABL loans (non-bank asset-based business lines of credit)
Equipment leases/sale-leasebacks
Unsecured cash flow loans - cash flow based lending
Govt Guaranteed Small Business Loans - Business loan new business
Sales Royalty Finance
SR&ED Tax credit financing
WHAT IS CASH FLOW FINANCING
Important Point: Owners/ financial managers should understand the following about loans for small business
1. In some cases, these alternative finance solutions can be combined or added on to one another - example: term loan and cash flow facilities
2. In some cases it's possible to have traditional bank financing in place as well as an alternative financing vehicle backstopping your bank facility
3. While the majority of these solutions are almost always used to finance operations and growth it's important to note that they can also be used to acquire a company or to finance management or leveraged buyout
If you're looking for the right ' fix' or a ' tailor-made' solution for your business financing needs in Canada seek out and speak to a trusted, credible and experienced Canadian business financing expert to fully understand the requirements and benefits.
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
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.