YOUR COMPANY IS LOOKING FOR BUSINESS CAPITAL!
YOUR GUIDE TO CANADIAN BUSINESS FUNDING
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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NAVIGATING THE BUSINESS CAPITAL LANDSCAPE IN CANADA
Business capital in Canada. Is this in fact the ' GOLDEN AGE ' for Canadian companies seeking financial capital and business credit and funding?
WHAT IS BUSINESS CAPITAL
While most business owners and entrepreneurs think of ' money ' as being capital, and cash that is in the business for generating a profit and return on investment, in general terms capital is actually the value and financial assets of the business which might mean everything from hard assets to patents and intellectual property in the business
While your business can generate a return on capital from the ongoing operations of the business a company also has the choice of raising more equity as well as taking on debt to fund the business.
So capital can come from a number of sources: owner investment, equity via angel investors, VC's, and private equity firms as well as traditional or alternative financing firms such as banks and alternative finance lenders - the new kid on the block in the Canadian business landscape.
Working capital and debt capital are often the most sought-after Canadian business financing solutions
We're not 100% sure ourselves; we read that rates are low and capital is abundant - while at the same time clients tell us it's never been as tough to satisfy lender criteria or access innovative capital solutions for their business needs - especially for the small business owner as well as medium-sized corporations looking for information for funding needs.
The reality is that many business owners who aren't in the Financial Post top 1000 in Canada spend a lot of their time ' finding ' financing. The goal seems kind of easy - find enough financing for your business at a cost that makes sense and gives you the amount of risk that the Canadian business owner and financial manager are prepared to live with. At 7 Park Avenue Finanical we want to provide the help that business owners and their financial managers are looking for in their search for funds.
That ' risk ' of course comes with the fact that too much debt, and might we add the wrong kind of debt can cripple a firm.
5 WAYS TO FINANCE YOUR BUSINESS
STRATEGIES FOR SECURING BUSINESS CAPITAL
At the end of the day, we can maintain there are essentially 5 ways to finance your firm when it comes to business loans and your capital structure - two of them, raising equity and issuing a bond or debenture are NOT the subject today.
What we're talking about is innovative ways of supplier financing, lease and asset financing for capital assets , and business lines of credit from banks or independent commercial finance companies.
DON'T FORGET SUPPLIER FINANCING!
Many businesses don’t fully realize of focus on the fact that supplier credit is in fact a key driver of your firm’s cash flow. Just negotiating long terms with your key vendors allows you to generate positive cash flow - That’s a fine line though as you ultimately need the support of suppliers. The last thing you want is for them to turn the ' credit tap ' off.
EQUIPMENT LEASING FOR ACQUIRING NEW AND USED ASSETS
Yes, you can buy the fixed assets you need for your firm - but over 80% of companies in Canada in fact lease their assets. Whether its trucks, cars, computers, telecom equipment and heavy machinery the business owner has the option of leasing assets for anywhere from, typically, 2-5 years. That allows you to use up the ' useful life' of your equipment and match it to cash outflow vis a vis the payments.
Accounting has specific rules around the type of leasing arrangements that you enter into, primarily revolving around whether you are entering into a capital lease ' to own', or an operating lease ' to use '.
THE BUSINESS LINE OF CREDIT IS A KEY FUNDING TOOL FOR DAY-TO-DAY OPERATIONS
Bank and commercial credit business capital in Canada supply businesses with revolving lines of business credit and funding. A credit line allows your firm to draw down and pay back up, based on pre-set limits, the amount of funding you need for your business. The security of course is the assets of the business, allowing you to constantly replenish working capital
MONITOR YOUR DEBT-TO-EQUITY RELATIONSHIP
As a business owner, you have to choose the right amount of debt and equity. The finance guys call that your ' capital structure’. Is there a perfect mix or ratio for that? The answer is... not really; it depends on the risk, flexibility, and amount of control you have in any particular financing.
SOURCES OF BUSINESS FINANCING
So, is it the Golden Age of business borrowing? Our opinion is... not really. But you do have options and there are probably many innovative ways to finance your firm and achieve access to capital that you have not contemplated ; from government programs to commercial financing.
These include:
Access to Canadian bank credit
Non bank asset based lines of credit
Equipment / fixed asset financing
Government Of Canada Small Business Loan Program - Guaranteed federal business loan - Arguably the best financing program for a startup and franchise acquisition
THE STARTUP FINANCING CHALLENGE - STARTUP TO SCALE UP!
Financing a new business start-up in Canada is always a challenge - In connection with their own savings and investment into a business many entrepreneurs recruit friends and family type investments - as well as explore crowdfunding options.
The majority of start-ups in Canada, if not 99% or more do not qualify or meet the criteria for business capital from venture capital or angel investors
Many startups can benefit from local ' business incubators ' that are more often than not in the high-tech sector. These organizations don't provide financing per se, but they will often provide mentorship, job creation, and sharing of facilities and hosting.
While ' grants ' are often sought after funds from the federal and provincial government in Canada this can be a time-consuming process, and often assistance from grant writers is required to source funds in areas such as r&d, productivity, etc. Talk to the 7 Park Avenue Financial team about grant financing strategies when grants require matching funding.
Business loans are available for the majority of small and medium-sized established businesses in Canada the startup has a large challenge in accessing financing. Good credit ratings and solid personal net worth will often attract some bank financing, but the best program by far, from a business loan perspective for startups is the Canada SBL loan - Recent changes to the program in 2022 increased the loan cap to over 1.1 Million dollars, and several different types of the financing were added to the program. The loan guarantee is provided by the federal government to the bank or credit union. A business plan should be provided with your financing request. SBL loans are one of the best financing solutions for small businesses in Canada, and the government loans out billions of dollars every year to thousands of firms.
CONCLUSION - TAKING YOUR BUSINESS TO THE NEXT LEVEL
Talk to the 7 Park Avenue Financial team - we know that the majority of businesses can access venture capital and Angel investments - Government funding and grants can consume management time - Let us show you how debt and cash flow financing solutions are available to your business today can work to take your business to new heights.
Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor for small business owners, who can assist you with your business capital and funding needs in Canada.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is the most effective form of business for raising capital?
Although a sole proprietorship or partnership can raise capital and borrow money the best form of business organization is the corporate legal entity. Equity capital can come from venture capital firms but venture capitalists or private investors will want a sizeable portion of the ownership of the business - as the goal and exit strategy of the VC is an initial public offering. Financial institutions prefer to deal with corporate entities as opposed to individuals when business lending is required. Economic growth is often easier to achieve by a company versus a private individual.
What is business capital in finance?
Capital in business financing is value creation and is often primarily identified only as cash and business assets. The financial statements of a business complete a full picture of balance sheet assets and profits.
What are some types of capital in business?
Different types of capital in business include debt financing, allowing companies to borrow from different sources such as banks, alternative lenders, and the government at interest rates commensurate with overall credit quality and type of financing.
Business owners have the choice of selling equity in the business via private financing or public equity offerings versus additional personal investment.
Working capital finance funds current assets such as accounts receivable and inventories and profit-generating assets can be financed on a long-term basis.
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