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Redefining Business Financing: The Rise of Alternative Funding Solutions
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Alternative Business Funding: The Game Changer for Small Business Success
Alternative business funding allows many smaller firms to.. get big!
For both sales growth and growing profit margins, it's essential to have the proper business financing in place - most business owners and financial managers recognize that.
INTRODUCTION
Today's fast-paced business landscape is more competitive than ever - Business funding solutions have become critical- But when traditional bank loan type financing is not able to be accessed for a variety of reasons around strict requirements and long application times what does the business owner do?
At 7 Park Avenue Financial, we have got an answer - alternative financing! It bridges the gap and can provide your company with financing that is flexible, and more importantly accessible! These solutions provide a business with business capital to grow and thrive - It's important to understand which of these financing options is best suited for your firm. Let's dig in.
Is the bank the only option? Categorically no, although most business owners for whatever reason view the bank as the only solution - only to be rejected for a variety of reasons, one of which is actually ' size ' believe it or not. While our Canadian chartered banks do a great job in financing large firms, they have numerous criteria in place that your firm might not be able to meet.
WHAT IS ALTERNATIVE FINANCING?
Alternative financing from alternative business lenders is any method of business financing which allows a business to acquire capital outside of traditional banks and other more traditional financial institutions. These non-bank commercial financing companies and asset-based lenders offer different funding options and alternative loans based on a company's qualifications and needs.
The business chooses alternative finance solutions as credit requirements are lower and funding is easier to qualify for - Additionally, a faster approval process compared to bank approvals provides funding around business expenses, growth and the need for ongoing cash flow.
Break Free from Traditional Loans: Unleash the Power of Alternative Business Funding & Financing Benefits
Banks often focus significantly, especially in the SME sector ( small and medium enterprises), on the business owner's and principals' personal credit history. They look for solid and high credit bureau scores, and low scores can impact your firm's ability to get a loan.
In some cases, banks might even determine an entire industry; for example, oil, autos etc., may for a time be... ' out of favour.' Canadian business history has plenty of examples of that. Occasionally banks might deem that a major customer of your firm actually creates a 'concentration ' risk.
Alternative funding sources allow business owners to position the business as the major reason to achieve credit approval. Business funding alternatives become more accessible in alternative finance because it's the business under the microscope, not so much the owners.
In today's environment, business capital for cannabis firms is in high demand. Banks have been reluctant to address all facets of cannabis financing, although this has ' slowly,' and we do mean ' slowly ' changing. Alternative funding sources, via non-bank commercial finance companies, provide finance solutions.
Cash flow is a major factor in assessing business loan potential. Business owners and their financial managers should be positioned to address the ins and outs of cash flow, i.e. sales growth, seasonality, collections, payables, etc. Many alternative funding solutions allow you to grow revenues when traditional bank financing is not available.
ALTERNATIVE BUSINESS FUNDING SOLUTIONS IN CANADA
Solutions for More Business Capital Via Alternative Business Funding Companies
Non-bank receivable financing / Invoice Factoring - Invoice financing via factoring is a business financing solution that allows companies to sell/finance to sell their outstanding invoices to a third-party commercial finance company / factoring company at a discounted rate in exchange for immediate cash. This method of financing is valuable for businesses that experience long payment terms and collection challenges from their customers based on payment terms or the need to improve their cash flow.
Advantages include improved cash flow management and the ability to run and grow the business without the constant need to ' chase customer payments' - Companies using factoring solutions from alternative lenders such as Confidential receivable financing should have good sales and profit margins.
Inventory Financing
Purchase Order Finance
Non-bank asset-based business credit lines - non-bank business lines of credit provide a flexible revolving credit facility to businesses that can draw down on capital when they need it without term loan-type obligations. These credit lines are custom-tailored and flexible and combine the company assets such as accounts receivable, inventories, and fixed assets as well as company owner commercial real estate into one single borrowing facility - Interest rates are higher than bank financing but eligible requirements and the lack of covenants is making this business finance solution more popular.
Tax Credit Financing - SR&ED Tax credit financing helps to finance research and development under Canada's sr&ed program
Lease Financing & Sale-leaseback of assets - Equipment financing and sale-leaseback solutions allow for the financing and purchase of new assets and technology required by the business - An excellent option for capital-intensive businesses.
Short-Term Working Capital Loans / Merchant Cash Advances - the merchant cash advance /short-term loan funding solution is an easily accessible working capital solution that is based on a formula or sales and owner personal credit history. Funds can be secured very quickly and flexible payment terms around cash inflows are offered via online lenders - these loans are higher cost.
HOW DO YOU CHOOSE THE RIGHT ALTERNATIVE FUNDING SOLUTION FOR YOUR BUSINESS
Choosing the right alternative funding solution for your business should be based on your cash needs, and the overall financial situation and growth challenge - Factors to consider include -
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Eligibility: Determine which business financing options are available to your business based on your business credit score quality and financial strength, as well as the particular needs of your business model and industry
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Financing amount required: Assessing the amount of capital your business needs and ensuring the maximum financing requires is available via any 1oneor combined solution
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Cost: Consider financing costs, interest rates, fees, and repayment flexibility offered via any funding solution that meets your repayment ability
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Speed: Evaluate how quickly funds are needed vis a vis timeline required to properly complete the funding process
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Flexibility: Compare structured term loan type solutions to more flexible solutions such as a/r financing.
We think you get the picture, and you don't necessarily have to take on ' debt ' to address capital and cash flow needs, as many of our above-noted solutions monetize assets or sales.
Be prepared when approaching an alternative business funder - financials, a business plan, and info on current lenders are a great start.
CONCLUSION - ALTERNATIVE BUSINESS FUNDING - THE GAME CHANGER FOR BUSINESS SUCCESS
When traditional bank loans become increasingly challenging the small business owner can look to alternative financing for financial support. Companies find the perfect solution that is custom-tailored and suited to business needs and long-term goals - allowing a business to prosper and consider growing.
Bottom line? Your business has lots of funding options, traditional and alternative. Seek out a speak to trusted, credible and experienced Canadian business financing advisor with a track record of success in alternative funding sources for small business.
FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION
What is the most popular type of alternative loan?The most popular type of alternative loan is a term loan. Term loans are lump sum installment business loans repaid over a period of time - typically 1-5 years, These loans tend to fund specific projects such as asset acquisition, or expansion. Both traditional lenders and alternative business financing lenders/funders provide this type of loan. What is the difference between traditional and alternative financing?Traditional financing typically involves borrowing money from a bank or other more traditional financial institution, such as a business-oriented credit union. Commercial borrowers must have strong financial statements, and collateral, and be able and willing to provide a personal guarantee. Alternative business loans and finance solutions come from commercial financing companies and asset-based lenders who are non-bank in nature. Alternative finance business funding tends to be more accessible for the business borrower.
How do startups get business funding?Startups obtain funding for small business loans from various sources, including traditional financing, banks, or equity-oriented business capital via venture capitalists, and angel investors. Solutions for alternative funding for startups from a government-guaranteed small business loan from a bank or credit union as well as grants are also available - Many communities offer start-up accelerators and incubators offering different types of infrastructure support for start-ups and small businesses.
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