How To Buy A Business With The Right Acquisition Financing

Guide To Financing A Business Purchase In Canada - A Guide For Business Buyers

When it comes to ' how do I finance a business purchase ' business loans to buy an existing business is not just all about negotiating the sale price - in other words, it's also about the necessary funding solutions & understanding other financing options from potentially multiple sources of funding, and a financing package that must be put in place to ensure business survival and profitability via conventional financing and/or alternative financing. Let's dig in.

 

  

WHAT LENDERS CONSIDER

 

 
The pros, of course, call it ' due diligence, when it comes to considering a business investment loan and how to buy a business at the right purchase price - On the other hand,  as well financing a business for sale is all about a pretty basic common sense premise: ensuring sales, inventory, accounts receivable and accounts payable are all reasonable, and that projected sales volumes make sense in the long term. The right business acquisition loans are an integral part of planning future growth to fund acquisitions.



Bottom line- the proper business purchase loan finance solutions tie together your plans for mgmt, mfg or delivering services, and marketing.



The essence of any business, large or small, is cash management. Working capital solutions and business financing rates must also be considered for effective ongoing operations.



A/R Financing/factoring -funding daily operational costs and maintaining adequate cash reserves



Bank Loan & revolving credit lines - repayment terms based on fluctuations in revolving credit facilities -A senior lender requires the loan to be paid off and has to meet financial covenants. A senior lender such as a bank requires the loan to be paid off in a relatively short period ( typically 5 years ) and will want you to meet certain financial covenants.



Non-bank asset-based lines of credit - applicable to leveraged buyout scenarios for firms with substantial assets - these loans come with a higher interest rate but can provide significantly more capital for your purchase



Inventory Financing



Tax Credit Financing

 

Business Credit Cards / Short Term Working Capital Loans - Certain conditions such as  good owner personal credit scores apply - these loans are readily accessible and are a term loan structure but come with a higher interest rate



Small business govt guaranteed loans (maximum 1 Million $) Small Business Loans To Purchase A Business Can Often Come From The Government Of Canada Small Business Loan Program - In the U.S. the question is the same, ie bank or sba loan. The Canada Small Business Financing Program was somewhat modelled after its U.S.  counterpart.

The Canada Government Guaranteed Loan provides guarantees and safety measures to participating financial institutions when they lend money for a business purchase. Intangible assets and intellectual property cannot be financed under the program but leasehold improvements and real estate are part of the program for this business loan.

 

Banks and credit unions are the most popular type of financial institution participating in the program. Monthly payments are based on competitive interest rates under a term loan structure.



Firms that are not profitable or that have ' challenged' balance sheets will not qualify for what we call ' traditional' finance. These types of companies can't comply with the financial ratios and collateral demanded by our Canadian chartered banks. Almost all businesses that sell on credit, large or small, need some sort of business credit line.



Numerous alternative financing solutions are in fact available - but at the same time, new owners/mgr must be able to address and talk to items such as gross margins, operating inefficiencies, etc.



At 7 Park Avenue Financial, we speak to many clients who wish to purchase a franchise business. That can be achieved via various financing programs, and might often include some ' seller financing ' when it comes to an overall finance strategy. That seller finance assistance in essence is another alternative capital that can allow the buyer to successfully complete the transaction. We also note that both new and used franchises can be purchased and financed.
 

BUSINESS ACQUISITION FINANCING CANADA - HOW TO FINANCE THE PURCHASE OF A BUSINESS

Buying a business for ' all-cash ' is almost never the option available to purchasers. Top experts tell us that not even a 1/3 of businesses purchased are done via 100% financing. Unfortunately, sellers like/want cash! More often than not the final structure of your transaction will be:



Owner Cash / Equity Financing  /  Dissolving Retirement accounts

External Financing

Vendor  Note Take Back - Vendor Financing /Seller Financing (not always, but often) -



‘ABL ' (Asset Based Lending) is often a solid solution for a business financing strategy, often in the case of leveraged buyouts with a focus on ' assets'. These types of facilities allow you to borrow heavily against inventory, accounts receivable and equipment/fixed assets.



One legal/technical issue often becomes a critical point in acquisition financing. That is the issue of ‘asset sales' vs. 'share sales'. From a buyer's perspective asset sales tend to make more sense - sellers focus on share and tax strategies for selling their businesses. This can often complicate financing as it relates to specific assets of the business and cash flows.



We've seen there are some critical issues that can make or break the success of financing a business purchase. Those issues include proper valuation pricing, debt load, working capital and cash flow financing challenges.  A solid business plan and proper cash flow projections are key to successful approval of financing - 7 Park Avenue Financial prepares business plans that meet and exceed bank and commercial lender requirements.

 

 

CONCLUSION - THE BEST BUSINESS ACQUISITION LOAN FOR YOUR NEEDS 
 

There are few people who can buy a business with cash and without borrowing. If you're focused on a winning deal and financing a business purchase properly seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding needs for a successful acquisition. We'll show you the most efficient way to fund your acquisition with a higher percentage of success!

 

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION

Can I finance the purchase of a business?  

When someone purchases a business, they typically use a combination of their own funds and external financing.

How much down payment do you need for a business loan?

There is no set deposit amount for business loans, as each business is unique. 10% to 30% is a commonly used amount.

What is a business acquisition loan?

A business acquisition loan is a small business loan for financing the purchase of an existing business.
    

Click here for the business finance track record of 7 Park Avenue Financial

 

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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 

Financing a business purchase buying a business | 7 Park Avenue Financial

Guide To Financing a Business Purchase When Buying A Business In Canada | 7 Park Avenue Financial

How To Access Revenue Based Financing & SAAS Finance Solutions In Canada

 

Royalty Based Financing Solutions For Saas Companies In Canada

 

Revenue-based financing is a new alternative to more conventional investments in the past decade, which tend to be equity financing based or debt - a solid solution and good fit for start ups as well.

 

 

REVENUE BASED FINANCING - THE BETTER OPTION FOR THE SAAS COMPANY? 

 

Recurring revenue finance lets founders raise funds for early stage companies for their growth initiatives without diluting their shares or providing collateral after their initial investment to start the business  - Monthly recurring revenue from gross revenues repays the loan.  Revenue based options are often viewed as better solutions than venture capital or bank financing simply because ownership stake remains intact :

 

1. Collateral is not required / No Personal Guarantees

2. Repayment is a flexible way to provide capital for a business - and unlimited funding is possible based on your revenues geared to monthly payments - Royalty financing is 'non dilutive'

3. Access to capital can be achieved in weeks - not months - your funding needs are aligned to your growth projections and loans are finished when the predetermined amount has been repaid on the initial loan amount based on your firms ' MRR ' - monthly recurring revenue.

 

Those are 3 great reasons to choose revenue based financing. Revenue  based financing is a powerful lending option. ' RBF ' offers flexibility and enables businesses to grow. More and more firms are turning to alternative financing solutions.

 

Revenue-based financiers analyze a business's past and future, both digital marketing spend and monthly sales revenue to determine whether or not they will provide a loan. Revenue-based financiers will ask for data about your business to predict its growth and make funding decisions - allowing owners to maintain full control


T hat allows you to repay the amount depending on your monthly revenue. Revenue-based financing is a loan with no interest, equity dilution or collateral required.

The revenue-based financing model provides an alternative to traditional bank loans, by only requiring a company to pay back during periods in which they generate revenues.


If you get a part of your future revenue upfront, then this is an opportunity for fintech owners to have more flexibility in using that money. A revenue-based financier can provide businesses with upfront funding, which is repaid based on the business's sales.

There are many different ways to raise capital for your SAAS ( software as a service), but each option comes with a caveat.

 

THE ALTERNATIVE TO  VENTURE CAPITAL / DEBT FINANCING

Angel investors and VC funds are used for startups that need heavy investment. Angel investors and VC funds are usually difficult to get funding from as they seek at least 10x return on their investments.

Under Saas financing businesses c use committed sales revenues as collateral for financing. Most experts agree it is better to grow your company and reach milestones before looking for VC funding. 

Entering the revenue-based financing space is a big step for any company, but one that can be very rewarding. Saas funding provides your company with the tools and metrics to help you track your business growth  - thereby giving any future investors or lenders more confidence in investing or lending.

 

HOW TO EVALUATE YOUR SAAS FUNDING / REVENUE-BASED FINANCE OPTIONS

 

Consider the effects of loans carefully; don’t just look at how much you can pay back, but also think about your future growth. Think carefully about how the loan is structured as it will affect your company’s future growth.

1. To avoid a severe cash crunch, your company's debt should not exceed 33% of annual revenue.

 

2. When considering repayment ability, consider how your company's growth can cover the SAAS funding via your strong gross margins associated with Saas

 

3. When a company is looking for funding, it may be asked to provide warrants. Warrants are the right to buy your company's equity in the future at a price agreed today.

 

4. Future options are important to keep in mind while evaluating loans. Ensure that lending terms keep your future options open.

 

Revenue-based funding provides borrowers with control of the business and increases the distance between borrowers in different stages of funding.

 

 

CONCLUSION- UNDERSTANDING THE REVENUE BASED FINANCING INVESTMENT VIA GROWTH FUNDING & ' VENTURE DEBT '

 

Revenue-based financing is a way to grow your business that has been proven successful for many businesses. The way to grow your business is by partnering with the right Revenue-based financier. Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian Business Financing advisor who can assist you with your funding needs for growth capital and entering new markets while taking your company to the next level of business success.

 

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION

 How does revenue-based financing work? 

Revenue-based financing is a way that firms can raise capital by pledging a percentage of future ongoing revenues in exchange for money borrowed.

Is Revenue Based financing a loan?

A principal investment amount is agreed upon by both the borrower and lender. Loans are paid back with a fixed percentage of monthly revenue.

 

 

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

<H1>Revenue Based Financing Saas Finance | 7 Park Avenue Financial</H1>

Business Loans For Debt Refinance And Business Refinancing

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BUSINESS LOANS IN CANADA - HOW TO REFINANCE A BUSINESS  

 

Business refinancing .. its a fact that business loans and debt refinance via commercial loans must be reexamined to ensure new or better financing is in the best interests of your current business position.

 

  

WHY DO COMPANIES CONSIDER BUSINESS DEBT RESTRUCTURING? THE BUSINESS LOAN REFINANCING PROCESS  

 

Your company might be considering a reorganization of its debt obligations via corporate refinancing ; in some cases that might mean totally or partially replacing debt or other times a full restructuring of the business. Naturally, the main reason to consider such an effort is to improve the overall financial position and capital structure of the company. It might mean better overall interest payments around the rate and cost of funds.

 

Rates have consistently dropped and remained low so companies doing well can certainly benefit from the low rate environment and save a business money in monthly payments/loan repayments in loan refinancing for any existing loans or existing debts of another kind.

 

REASONS TO REFINANCE BUSINESS DEBT - DETERMINING IF REFINANCING IS A SMART BUSINESS MOVE

 

Leveraging the owned assets in your business can also provide significant collateral liquidity. This can be accomplished by a sale leaseback process for both leveraging assets in equipment and real estate commercial properties. Those funds can be used to pay down debt or put back into the company for projects around marketing and research and development with loan repayments that make sense under the leaseback cash flow repayment. Potential savings under a refinancing option for a leaseback can be significant.

 

Business owners should be reminded that investments in r&d capital tax credits can be financed for more working capital under a SR&ED Tax credit short-term loan to recover r&d costs as opposed to refinancing your business - A typical loan term for a Sred loan is 6-12 months.

 

Refinancing a premise you own via a commercial mortgage refinance is a classic business refinancing strategy, notwithstanding the fact these business assets are often held in a related company. In other cases, it might be ' credit-driven ' - allowing you to consider other more flexible financing options.

 

Credit history and the personal credit score of owners will also often play a role in the refinance process when it comes to debt consolidation. The ability to consolidate debt and the personal finance of owners are inextricably related. Personal assets of business owners are sometimes used as additional collateral for some forms of refinancing.

 

Suffice to say that in many cases these days, pandemics included, it's a case of fixing the business around any existing loan for a firm that might be exhibiting some sort of distress and a lowered overall business credit score. Emergency short term working capital loans, sometimes referred to as a merchant cash advance also can facilitate short term funding needs. These loans do are more expensive, and do not come at a lower interest rate but are easily accessible. Your annual revenue is a key factor in the size of these loans. This short-term loan is a term loan structure and the total loan is repayable over a 1-year term.

 

The ability to complete a small business loan refinancing successfully typically will deliver more cash and working capital to the business for daily operations and long term success. While it is not always about ' the rate '  in a new loan when it comes to the refinancing of debt it is safe to say that firms doing better do have the options of a refinance strategy that will allow a lower cost of funds. That typically can lead to more growth opportunities when restructured loans are well thought out and executed properly.

 

Naturally, most refinancing of existing loan opportunities also has different costs attached to the process, and it's important to consider those. Those refinancing costs for an existing business loan might include the fees of business advisors, lawyers, and accountants, that ultimate business triumvirate! In certain cases, certainly when including real estate in the mix up to date appraisals might be required, as well as early prepayment penalties being considered. Many businesses need to consider lending solutions from alternative lenders who these days abound in the Canadian business landscape these days - competing with banks and credit unions.

 

 

TIMING IS EVERYTHING IN CORPORATE RESTRUCTURING 

 

At 7 Park Avenue Financial, our experience in working on restructuring and refinancing transactions has taught us that one ' cost ' of refinancing is the amount of time and management involvement in working through the whole process. It is certainly not unusual for a positive restructure to take at least a few months that might include the preparation of business plans, cash flow forecasts, lender negotiations, due diligence, and on it goes!

 

KEY POINT? 

 

Allow time for the process of restructuring Loans The greatest cost of corporate debt restructuring is the time, effort, and money spent negotiating the terms with creditors, banks, vendors, and authorities. The process can take several months and entail multiple meetings. As we have noted, it's not always ' doom and gloom ' in the refinance process. Companies doing well might be facing strong growth challenges, or in some cases addressing seasonal or one-time large orders and contracts. In many situations, a company can avoid taking on long-term debt in the financing of large orders and contracts by considering purchase order financing and A/R financing solutions.

 

Leverage sales via those latter two solutions to avoid costly and time-consuming refinance, so the ability to proactively analyze your needs carefully is key. An examination of your financials with the help of your accountant or advisor should be able to pinpoint the right solution, and here cash flow forecasting is key. Certain external events might also lead to a refinance process - that could be an owner equity infusion or perhaps a large receipt of funds from, for example, a customer. An owner equity infusion, as we have referenced above has the effect of improving debt to worth ratios and making other refinancing more possible.

 

The ability to combine loans or extend terms can have a very positive effect on cash flow. While we have discussed many of the positive aspects of a business refinance there are numerous circumstances that may have placed a company in some level of distress. A formal or informal organization might be required, if only for the sake of keeping a company in business. It's at this time that careful thought and time must be given to negotiating with banks and other secured creditors.

 

The focus now becomes reducing debt, achieving an interest rate and cost of funds that a company can live with, and ensuring terms match the long term prospects of the company. Although rare in some cases certain creditors may be persuaded to forgive debt or take some sort of ownership or warrant position in the business. The ability to save a company from any sort of formal bankruptcy or receivership becomes the total focus of management and their advisor.

 

  

PREPARING THE TURNAROUND REFINANCING PLAN  

 

Various problems precipitate a turnaround requirement, falling sales and negative cash flows and losses are near the top of the list. Therefore being able to pinpoint the key sources of the need for restructuring is critical. As you and your mgmt and advisor put forth the right turnaround it's essential to be able to provide key documents to interested or vested parties. Don't forget to take any origination fees and closing costs into account when refinancing your loan situation.

 

Key parts of your package should include: Mgmt analysis of the problem/solution Historical and interim financial statements Cash flow forecast/business plan Details on secured creditors/collateral held Aged Payables / Receivables Personal financials of shareholders/owners Having that type of package in place allows your restructuring to be viewed positively from a viewpoint of being prepared.

 

In certain cases your firm might be in the Special Loans section of your bank's restructuring unit; working with a bank through a forbearance agreement when your demand loan is called will often require the expertise of an experienced Canadian business financing advisor to put a brand new loan or financing in place. Changes will always occur in your business and owners and financial managers must evaluate the cash flow and debt position of the company. So what are some of those reasons that loans are refinanced, or a new financing structure is brought into the company?

 

In some cases certain gains in the value of assets of the business allow owners to take out equity, or in some cases totally ' cash out '. Current management might be focusing on a management buyout or some form of succession planning might be taking place when you redo or consolidate loans. Interest rates play a key factor in business refinancing - in a perfect world rates might have declined and allowed your business to refinance under better terms under a smart business strategy.

 

In other circumstances loans are refinanced to either reflect a more positive cash flow - or more often than not new credit lines are required to reflect the growing need for working capital due to higher sales, larger contracts, etc.

 

In many cases, merger and acquisition opportunities arise. Here loans are combined, and new financing structures might be introduced to reflect positive financial statements for the combined business. Currently, there is large popularity around short term working capital loans, allowing companies to generate immediate cash needs without taking on the burden of significant long term debt.

 

Lease financing is often restructured to reflect the useful life of assets, which can either depreciate or appreciate based on the nature of the asset. On occasion, the actual business owners may wish to address personal guarantees that are in place around current debt guaranteed by the business owner. If there is a bottom line on a company's ability to refinance business loans it's simply that each industry and company has different financing needs that might or might not be called debt consolidation or refinancing, and those needs change over time. That covers the gamut from financing distress to high growth.

 

 IS REFINANCING REALLY THE SOLUTION FOR SMALL BUSINESSES? 

 

In numerous instances, a simple amendment to existing debt might be a logical and simpler solution; augmented by additional cash flow financing via solutions such as non-bank asset based lines of credit, short term working capital loans, including easy cash flow solutions such as accounts receivable financing, factoring, etc. At 7 Park Avenue Financial, our most recommended solution for additional capital in this area is Confidential Receivable Financing, allowing you to bill and collect your own receivables and turn them into instant same-day cash. That's a smart business move!

  

CONCLUSION  

 

A detailed analysis of your company's overall financing structure will often point to the need to refinance. Those all-important loan covenants or guarantees need to be reviewed to ensure proper refinancing action can be taken. We can therefore say that refinancing or restructuring debt for small business owners in some cases can be viewed as an opportunity, so speak to  7 Park Avenue Financial for more information about refinancing options under your firm's financial situation, a trusted, credible and experienced Canadian business financing advisor with a track record of success for Canadian loan product solutions.

BUSINESS REFINANCING

  

FAQ: FREQUENTLY ASKED QUESTIONS  

 

What is business refinancing?

The process of corporate refinancing is the replacement or restructuring of existing debts. Traditionally, small businesses were able to rely on traditional banks for loans and options for refinancing business debt.

 

 

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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/2021

How To Get Funding For A StartUp

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Guide To Startup Funding In Canada

YOUR COMPANY IS LOOKING FOR STARTUP FUNDS!

FUNDING FOR STARTUP NEEDS IN CANADA / HOW TO RAISE MONEY FOR A BUSINESS

 

New business financing for a small business in Canada requires the owner/owners to understand the risk and opportunities in startup challenges. Business finance is all about the risk of balancing starting and growing a company. Let's dig in on resources and methods of financing a startup!

 

 

SOURCES OF START-UP FINANCING  / STARTUP FUNDING

 

If entrepreneurs want to prove that their business is a priority, it's important to know when and how to diversify funding sources to fund the high growth potential of the business.  Having the right financing strategy will help protect your start-up from downturns in the market as well as giving lenders a glimpse of what they can expect if they fund your project when it comes to funds for startups.

Banks are only one source for funding - and the majority of businesses are not eligible for angel investors, crowdfunding, let alone venture capital or private equity type firms. ( By the way, those venture capitalists want a significant portion of your ownership when it comes to company funding and raising funds for startups ).

 

  

YOUR PERSONAL INVESTMENT  

 

When it comes to start up  business funding for a venture of any kind for the first time, it is often helpful—even necessary at times—to use personal investments or collateral on assets as seed money. This will prove that not only are you committed long-term but also willing to take risks if they present themselves along the way - It's the proverbial ' skin in the game' when it comes to being successful in start up loans.

 

 

BALANCE BETWEEN DEBT AND EQUITY  

 

A significant consideration in financing a new company via a business loan is the delicate balance between debt borrowed as well as ownership equity in the business. Your ability to leverage the company properly is the true goal - not missing opportunities as well as not risking default when funding with debt.

 

The bad news in business credit is there is no perfect answer relative to the right combo of external financing and owner investment.

 

STARTUP STAGES OF FUNDING

 

Early-stage companies need to realize that only certain forms of capital financing are available to the business.   Safe to say that more substantial and more established companies have a variety of additional business finance solutions available.

 

FUNDING SOURCES FOR THE EARLY STAGE OF A BUSINESS

 

What are the funding sources available for earlier-stage businesses? The life cycle of a new business has different cash needs - from pre-revenue all the way to high growth! Financing a business is all about knowing which stage your business is in and what is the best business startup loan that meets your specific needs.

 

it's all about determining the minimum amount of capital you need around your business model and what alternative structures might be available as opposed to traditional bank financing.

 

 

  

CRITERIA FOR LOAN APPROVAL FOR STARTUPS  

 

While some business owners pursue federal government grants these are often difficult to obtain as well as time-consuming. Borrowers should be aware that some types of loans have stringent criteria, require an appropriate amount of due diligence on yourself and the business,  as well as your ability to inject some of your own funds into the business. 

 

Depending on the type of loan and nature of your business anywhere from 10-40% of the project will typically be funded by your own down payment or equity injection.

 

Ensure you have a solid business plan that describes your business idea as well as the financial plan related to the business regarding cash flow and profit projections and management expertise. 7 Park Avenue Financial prepares business plans that meet and exceed the expectations of banks and commercial lenders.  Your own ability in how to present a business plan and explain cash flow and profit potential is key.

 

FINANCING SOURCES

 

A/R Financing/factoring

Inventory loans

Equipment finance

Short Term Working Capital loans

Non-bank business lines of revolving credit

Govt Guaranteed Small Business Loans

Tax Credit Financing

 

As you may have figured out, it's really all about determining what stage your company is in, as well as having a good handle on industry characteristics.

 

DEMONSTRATE THE CHARACTERISTICS OF A GOOD STARTUP

 

Naturally, business owners are focused on less expensive capital, notwithstanding the fact that many forms of capital will always be more costly than traditional bank financing or equity finance alternatives when it comes to small and medium sized firms. Your ability to demonstrate some good growth, profit margins and an experienced ownership/management team will go a long way to reducing individual startup new business financing costs and rates.

 

Planning in advance never hurts, issues such as a good business plan, cash flow forecast and mgmt overview are key to getting the right financing before you may necessarily need it.

 

Also, separating long term asset and finance needs from short term working capital and cash flow solutions will demonstrate a proper ' matching ' of sources and uses of funds. The best example of a poor financing strategy is to use short term funds to finance long term assets - for example: using a line of credit to fund a capital/equipment purchase.

 

 

Proper mgmt of business and personal collateral is key to also managing future financings. Quite often a combination of different funding and capital financings is the best solution for a new business. Proper use of guarantees and asset lines is key in the early stages of a company.

 
 

Funding for a small business will always be a challenge - many clients we meet at 7 Park Avenue Financial tell us they often don't even know where to start when it comes to financing options. The reality is though that there are in fact financing choices you can make in the start-up phase.

 

  

GOVERNMENT LOANS FOR NEW BUSINESSES IN CANADA  

 

Canadian small businesses looking to access new assets or improve their operations can take advantage of the Canada Small Business Financing Loan (CSBFL), a government-backed loan program that offers support of up to $1,000,000 in financing. Thousands of businesses every year utilize the guaranteed government loan program for funding for startups in Canada.

 

Canada's non-bricks and mortar entrepreneur bank offers term loans and working capital loans if companies meet lending criteria. The essence of that lending criteria is good personal credit and net worth as well as business experience and the ability to put some equity into your project. This business start up loan is typically a term loan with a defined repayment structure

 

Although many new businesses have been financed on the backs of business or personal credit cards we at 7 Park Avenue Financial don't recommend the mixing of business and personal credit borrowing in financing for startups if at all possible.

 

Of course, there is the proverbial ' family and friends' generally also not a recommended strategy when it comes to payback and relationships!

 

Some online portals also offer business loans but they can be very expensive although the appeal of quick and relatively easy financing is seductive for many business borrowers.  We always recommend that a client prepare a solid business plan outlining their experience, cash flow projections, and otherwise.

 

 

 CONCLUSION - BUSINESS START UP FUNDING 

 

If you're focused on a loan for a business, and the best type of financing and the right business loans for new or early-stage small businesses speak to  7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your start-up and growth needs when it comes to start up costs for business

 

 FAQ: FREQUENTLY ASKED QUESTIONS 

 

Can you get a bank loan to start a business?

Bank loans are the best way to get your small or medium-sized business going. That's because all banks offer different advantages, whether it’s personalized service or customized repayment plans. It would be a good idea for you to shop around and find which bank meets your specific needs before committing yourself to one particular institution!

The challenge in funding startups via banks is that Canadian banks prefer a track record in later stage firms, ( typically at least 2 years in business)  as well as very solid personal credit and credit scores for the business owners - as well as the requirement for a personal guarantee to back up the loan.

 

What is bootstrapping in business?

 

Despite the current bull run in start-up financing, not every company needs to get funded. Some businesses can be started and grown organically without needing any outside funding at all.
In a world where most investors are looking for instant returns on their money, there is something refreshing about starting out with nothing but your own energy and creativity that makes it easy to have success when you operate this way from the beginning of your business venture - some might say easier than trying to grow by acquiring other companies.

 

Can you finance r&d credits?

 

Under the Canadian Scientific Research and Experimental Development Tax Incentive Program (SRED or SR&ED), tech startups can access up to 35% of what they've spent on eligible R&D activities as a repayment from the CRA. This refund can amount anywhere between a few thousand dollars to several million dollars, making it an accessible option for those just starting out and making a commitment to research and development in intellectual property and in their overall capital funding process as they invest in the future of their products and services.

SR&ED loans are suited to every industry but are very common in the technology space in Canada when it comes to ' fintechs' and funding for research in areas of software, etc.

 

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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/2021

Startup New Business Financing Business Finance | 7 Park Avenue Financial

Guide To Business Line Of Credit Needs : ABL Ends Your Search For A Cash Flow Solution Alternative

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THE CREDIT LINE SOLUTION YOU HAVE BEEN LOOKING FOR!

 

Business line of credit needs are often challenging when owners/financial managers are trying to run...and, oh yes, 'grow' their company.

 

 

WHO OFFERS BUSINESS LINES OF CREDIT 

 

That’s why ABL, the acronym for asset-based lending operating facilities, can deliver a solution for almost every business - with only 1 prerequisite - assets such as receivables, inventories, equipment, or even real estate. Let's dig in.

 

FLEXIBLE FINANCING OPTIONS

 

So why is ABL becoming one of the fastest ways to get your business financing going? The answer -a valuable tool known as a line of credit for business. It's a working capital facility, similar to a bank facility that provides working capital on a regular basis against inventory, receivables, and in many cases, equipment and real estate if that is applicable. 

 

One can argue the case forever on whether Canadian banks are providing the right amount of financing and support for small business, and yes, even large businesses in Canada - We don’t think we’ll get full closure on that discussion, although bank interest rates have never been more attractive for those that qualify.

 

Most top experts and studies say that SME COMMERCIAL FINANCE needs are certainly not fully delivered by traditional banking institutions as it relates to new firms, high-growth firms, or businesses with any kind of financial challenge on their balance sheets and income statements.

While smaller businesses might rely on credit cards or short-term working capital loans the best solution is access to a revolving credit solution.

 

So assume you either can’t qualify for a chartered bank business line of credit  or unsecured loans from banks , or, on the other hand , perhaps do, but the facility doesn’t meet your needs - in some cases, the preset credit limit may be not enough for your growth needs.  That’s where an ABL or asset-based line of credit comes in.

 

  

SUPPORTING CASH FLOW NEEDS AND BUSINESS GROWTH GOALS  

 

How does ABL work then?  It’s a simple, no-nonsense form of financing provided by non-bank-type firms - typically commercial finance companies. Many call it 'alternative financing,' but we can assure you this form of ‘business financing' is becoming more mainstream and popular every day.

 

 

DOES YOUR COMPANY QUALIFY FOR A BUSINESS LINE OF CREDIT?

 

How to qualify for a small business loan or revolving line of credit is information that every business owner must know.

Because the chartered banks focus on traditional metrics such as your overall financial performance, outside collateral, credit score and credit history of owners, personal guarantees, etc., you will find the overall  business credit line requirements under the ABL process much simpler and common sense. It’s simply a case of borrowing against your real assets, with little or no reliance on the issues we outlined above relative to a bank-type facility.

 

PAY INTEREST ON ONLY WHAT YOU BORROW UNDER YOUR CREDIT FACILITY

 

The specialty of an asset-based line of credit provider is simply their strong knowledge of your industry and assets, so because of that, your ability to generate almost unlimited working capital becomes very obvious very early on in the picture. As with any business credit facility you pay interest on the credit line loan only on the amount outstanding that is utilized in your facility and you still use your regular business bank account as funds are deposited there for your use. Business loan rate of interest and charges are based on overall credit quality.

 BANK CREDIT LINES  VERSUS OVERDRAFTS 

 

Traditional bank business lines of credit provide ongoing access to funds for your day-to-day operations, sometimes through an overdraft limit.

Key benefits are the liquidity available for business needs and the ability to manage cash flow as needed.

Access to bank credit requires solid proof of your company's business financial performance. Typical supporting documents include company financial statements,  business tax returns and personal financial information and credit history of the owner/owners. A business plan is typically always required -  7 Park Avenue Financial prepares business plans for clients that meet and exceed bank and commercial lender requirements.

Banks will, on approval set a credit limit and interest rates associated with the credit line

 

WHAT AMOUNT OF LINE OF CREDIT DOES YOUR FIRM QUALIFY FOR?

How does a line of credit work? What do we mean by that? Simply that if you have receivables, assets and equipment you can always borrow against them on an ongoing basis so typically you can draw down on 90% of receivables, 40-70% of your inventory values, and pre-agreed upon amounts on the appraised value of unencumbered equipment.

 

When It comes to how to increase credit limit needs commercial lending asset-based financing solutions increase automatically as your sales and other assets grow - a ' borrowing base certificate' is prepared every month with new limits.

 

Typically companies that are the best prospects for this type of financing are firms with fast growth and in some cases a limited track record i.e. a start-up, etc. who can benefit from a revolving line of credit.

 

In some cases, this type of business operating line of credit could possibly be complementary to your existing bank facility, but more often than not, it replaces it totally.

 

  

WHAT YOU NEED TO KNOW ABOUT LINES OF CREDIT AND THE COST OF FINANCING  

 

How are 'ABLs' priced? While there are a number of key advantages to an asset-based line of credit they do normally cost more than bank facilities. Depending on the size of the facility and the overall nature of your firm, its industry, and other challenges you might be facing, the final pricing will reflect a realization of those issues.

 

So yes, it will cost more, but those costs can be significantly offset by increased cash flows via inventory turns, the ability to purchase smarter with that cash and to convert receivables immediately into cash for additional sales efforts.

 

WHO QUALIFIES  FOR BUSINESS CREDIT LINES

 

Don't forget though that you have in effect just negotiated unlimited working capital, and have those credit line benefits and the ability to turn assets more quickly and generate increased cash flow, revenues and profits. That’s a true business financing triple threat!  If you're looking for more good news, understand also that asset-based operating credit lines are suitable for pretty well every industry in Canada - Again, it's always about the assets.

 

  

CONCLUSION- BUSINESS LINE OF CREDIT CANADA  

 

Speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor in this area to ensure that you determine if you can benefit from a small business line of credit or another business funding source for a business financing arrangement for your growth and business needs.

 

  

FAQ: FREQUENTLY ASKED QUESTIONS  

 

What is a business line of credit?

Business lines of credit are revolving loans that give businesses access to funds based on specific assets , most commonly accounts receivable and inventories. Commercial line of credit interest rates are based on an assessment of the overall company credit score

 

 

 

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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/2021