Fuelling Business Growth - Guide To Commercial Business Loans

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YOU ARE LOOKING FOR A COMMERCIAL BUSINESS LOAN

UNLEASH BUSINESS POTENTIAL WITH THESE DIFFERENT TYPES OF COMMERCIAL BUSINESS LOANS

You've arrived at the right address!  Welcome to 7 Park Avenue Financial 

        Financing & Cash flow are the  biggest issues facing businesses today 

               Unaware / Dissatisfied with your financing options?

Call Now !  - Direct Line  - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs.

Email  - sprokop@7parkavenuefinancial.com

 

UNLOCKING THE POWER OF COMMERCIAL BUSINESS LOANS

 

 

 

INTRODUCTION 

 
In many cases, access to different types of commercial loans can be challenging for business owners to achieve. 

 

Certain types of funding are often much better suited to small business financing needs. There are different types of commercial business loans for funding your business. These essential types of financing help start, grow, and sustain business operations. Other qualifications apply to different kinds of business financing - Choosing the right loan for your business should be job 1! Let's dig in.

 
 

As a business owner, you want to make informed financing decisions. Some loans may offer lower interest rates but more rigid qualifications for borrowing when it comes to qualifying for traditional financial institution bank credit or a similar business credit union solution.

 

WHEN ACCESS TO CAPITAL IS TIME SENSITIVE

 

The time-sensitive borrower must weigh their options to determine which type best meets their needs and circumstances at any given point in time. Some conditions can change over time due to market fluctuations or other factors outside of one's control - whether long-term loans or short-term funding solutions for the loan type.

The good news is that several business finance solutions are more accessible than ever.  Naturally, the ' go-to ' in the minds of many owners and their financial managers is ' the bank. '  Here, capital is virtually unlimited, and the interest rate via fixed or floating rates is typically the lowest regarding the cost of funds for business borrowers.

 

TRADITIONAL FINANCING

 

Traditional loans from banks and other financial institutions are the most common type of commercial business loan. The majority of these loans require collateral,  good personal and business credit, and in some cases, a business plan.

 

The most popular financing in this area is bank term loans, government-guaranteed loans, and business lines of credit. Term loans are lump sum installment type loans for specific projects or investments in the business -  Federal guaranteed loans have less stringent qualifications as the government of Canada backs them.   Access to a business line of credit provides funding for day-to-day business operations, focusing on flexibility/access to capital.

Bank financing comes with a challenge, though - the need to provide full financial disclosure around financial statements, owner personal credit history and net worth,  collateral, personal guarantees,  and in many cases, the requirements to produce a business plan or cash flow forecast. Don't forget to take into consideration the ' timing ' factor, in that the processing time might often be weeks stretching into a month.. or more.
 

 

 

 

 

WHAT TYPES OF BUSINESS LOANS ARE OFFERED BY BANKS?

Types of business loans offered by banks :

Business lines of credit / online banking facilities

Term Loans

Equipment Loans

 

Commercial Mortgage

We can safely say that Canadian banks offer business financing options with the most flexibility, lowest interest rates,  and access to unlimited capital when a firm qualifies.

 

 

 

KEY FACTORS IN BANK LOAN APPROVAL 

 

In recent years access to  SME Commercial financing solutions has changed. Banks and credit unions have become more difficult to get traditional loans from for some businesses; fortunately, there are other options for easy access to the funding they can turn to if this is the case.

 

 

Factors such as years in business, profits, acceptable balance sheet ratios, etc., are key to bank loan approval in a bank's desire to mitigate risk.

Early-stage businesses often utilize personal financial resources to access cash, including business credit cards, loans from friends and family, etc.

 

 

 

At 7 Park Avenue Financial, we encourage clients to separate personal and business financing. Those types of resources are not often the best choice to finance a company, as business failures can significantly damage personal credit.

 

 

ASSESSING THE COST OF FINANCING VERSUS ACCESS TO CAPITAL

 

Is there a clear winner when it comes to interest rates? It turns out not necessarily. Sometimes the longer-term loan will cost you less than its short-term counterpart—even if that one has lower monthly payments and a more affordable interest rate.

 

A lower bank loan, as example, isn't always the lowest-cost loan. This can be true when comparing a long-term lower-interest-rate loan with short-term financing at a higher cost.

 

 

 

ALTERNATIVE FINANCING SOLUTIONS 

 

Alternative loans in Canada are known as non-traditional / non-bank financing for businesses that might in some cases, not qualify for traditional bank financing.  The broad category of these loans comes under the term ' Asset-based Lending'  and includes non-bank business credit lines and invoice factoring. Peer-to-peer lending and short-term working capital loans, also known as merchant cash advances,

Those firms that can't access all or even some of the funding need lender alternative financing to the rescue. Alternative lenders provide the same types of loans available from banks - and are often quicker to approve loans. This financing cost is higher, but it provides access to capital.

 

 
 SPECIALTY LOAN FINANCING  

 

Numerous types of business comes come under the category of  ' specialty finance '. This includes lender financing ( financing for lenders ), equipment and lease financing, commercial real estate financing via mortgages or bridge loans and franchise financing. Talk to the 7 Park Avenue Financial team about how these loans might help your business!

Non-bank business credit lines - focusing on the actual borrowing power of your assets. Asset-based lending is a form of commercial financing in which the company's collateral such as accounts receivable and inventory, is used to provide working capital.

Inventory Financing

A/R financing  ( aka ' factoring ' )

Short-term financing / Merchant Cash Advances /  Corporate credit cards / working capital loans - flexible payment structures to cover operational costs - transactions are approved quickly, and funding is fast compared to traditional financial institutions.

Tax Credit Financing  ( SR&ED loans )

 

Franchise loans - Eligible costs to finance a franchise

 

 

 TALK TO THE 7 PARK AVENUE FINANCIAL TEAM ABOUT YOUR FUNDING NEEDS

Both banks and alternative finance companies provide loans for long-term business growth - These needs might include :

Commercial real estate  mortgages for owner-occupied buildings and  facilities

Mergers and Acquisitions

Franchise Financing

Leasehold Improvements -  ( leaseholds can be easily financed via the Government guaranteed business loan ) New assets can enhance the value of your business.

 

 

Thousands of businesses annually use Government guaranteed loans with competitive interest rates and limited personal guarantee. The total amount available under the program is 1 million dollars.

These types of lending for small businesses are typically longer in duration - ranging from 2-5 years - Government loans can be accessed at competitive fixed or variable rates. This is not an operating line of credit but a term loan structure. Revolving lines of credit are available from banks and alternative lenders if a company is not a start-up. Start-up business loans can be a challenge for entrepreneurs.

 

 

Export Development Canada, another crown corporation, provides purchase order financing, contract financing, and credit insurance for an existing business expanding into other markets in the U.S. and internationally.

 

Talk to  7 Park Avenue Financial about EDC/Export Development Canada and BDC crown corporation financing solutions for a growing business.

 

 
 

 CONCLUSION - TYPES OF FINANCING FOR COMMERCIAL LOANS FOR SMALL BUSINESS & CHOOSING THE RIGHT COMMERCIAL LOAN  

 

Choosing the right type of business loan will help guarantee business success. For approval, business owners and financial managers should carefully assess the financing they need, repayment terms, business loan rates and qualifications, and business loan requirements.  Canadian business financing can sometimes be a long process, so plan and be prepared to weigh the pros and cons of each type of financing that will allow you to fulfill unique business needs and growth plans.

 

Talk to the 7 Park Avenue Financial team about financing and supporting your growth needs without diluting equity. Whether your funding revolves around growing sales revenues, focusing on turnaround financing,   or accessing working capital, we've got the solutions you need. Looking to buy a business or execute a management buyout? Talk to us about our work in this area.

 

When small businesses need capital, it often looks like commercial loans. Commercial loans are different for large businesses because the scale of a loan differs in size, but small and medium-sized businesses also need to rely on access to funds to help fuel growth or fund day-to-day operations.

 

Small businesses rely on commercial loans to fuel growth and fund many day-to-day operations like large corporate entities do. Commercial loans might differ in company size, but access to capital is important for any business looking to grow or operate successfully without having a negative impact or risk financially.

 

For more information about the full potential of different types of business loans, especially if you are focused on ensuring you understand and have access to the right type of commercial loans for your company, speak to 7 Park Avenue Financial,  a trusted, credible and experienced  Canadian business financing advisor with a track record of success in solving Canadian business needs and your goals to stay competitive.

 

 

 

 FAQ: FREQUENTLY ASKED QUESTIONS  / MORE INFORMATION / PEOPLE ALSO ASK

 

 

What is a commercial business loan? 

 

A commercial loan is a financing arrangement between a business and a financial institution like a bank. Loans can be used for various services and are arrangements that typically bring debt to the company's balance sheet. Commercial loans are for corporations and not consumers and generally are under a term loan structure. 

The financing provides the funds to start, grow and sustain ongoing operations. Commercial business loan solutions providers include bans, alternative lenders, commercial non-bank financing companies and business-oriented credit unions. Each provider of business loans will have different credit approval and qualification requirements and different interest rates based on transaction size, credit risk, etc.

 

What are the different types of commercial business loans?

Different types of commercial business loans include traditional bank loans, specialty loans and asset-based lending loan solutions. Conventional loans will be in the form of term loans or business loans of credit, and specialty loans are related to specific industry needs, examples include real estate financing, franchise loans, equipment purchase leasing, etc.

 

How do I choose the right commercial business loan for my business?

 

Choosing the right loan for a business should include assessing factors such as the type of financing needs, availability of flexible repayment terms, interest rate, and approval qualification requirements from the business lender. A business plan will often help identify the type of financing needed, and businesses should be prepared to provide appropriate documentation around financial statements, business plans, and the availability of collateral.

 

 

What are some forms of equity financing?

Forms of equity financing available for a business include angel investors, venture capital companies, private equity firms, and crowdfunding. These forms of financing will often require the business to be in a higher growth stage.

 

   

 What is the minimum credit score for a commercial loan from a bank?   

Commercial banks require a 650+ credit score to lend.

 

 

 What are the most common commercial loans? 

 

 

The most common commercial loans are commercial mortgages, term, government, and bridge loans/business credit lines.