WELCOME !

Thanks for dropping in for some hopefully great business info and on occasion some hopefully not too sarcastic comments on the state of Business Financing in Canada and what we are doing about it !

In 2004 I founded 7 PARK AVENUE FINANCIAL. At that time I had spent all my working life, at that time - Over 30 years in Commercial credit and lending and Canadian business financing. I believe the commercial lending landscape has drastically changed in Canada. I believe a void exists for business owners and finance managers for companies, large and small who want service, creativity, and alternatives.

Every day we strive to consistently deliver business financing that you feel meets the needs of your business. If you believe as we do that financing solutions and alternatives exist for your firm we want to talk to you. Our purpose is simple: we want to deliver the best business finance solutions for your company.



Showing posts with label business loan rates. Show all posts
Showing posts with label business loan rates. Show all posts

Saturday, July 25, 2020

Business Financing Interest Rates & Loans In Canada The Not So Secret Way To Understand Cost Of Business Finance


















What Is The Interest Rate On A Business Loan? Is There An Average Small Business Loan Interest Rate

 

  



Clients at 7 Park Avenue Financial who come to discuss their CANADIAN BUSINESS FINANCING needs are looking to compare business loans / rates and understand the rationale and qualifications around achieving best business loan rates. Small business loan rates in Canada and financing costs are certainly one key factor in understanding your financing costs to run your business, whether you are a small business or a larger corporation, and yes, even a start-up for new business financing.

Qualifications vary for different types of financing and there are numerous other key factors in the business loan decision. There also can be miscellaneous costs associated with any one type of business finance solution, and those must be considered also. Some entrepreneurs and commercial borrowers look to alternative sources of private financing such as friends and family, angel investor networks that offer rates vastly different from banks and commercial financing companies -although many of these types of borrowings tend to be ' equity ' related.

ADDITIONAL POINTS TO CONSIDER IN THE BUSINESS LOAN / INTEREST RATE DECISION


In certain types of financing the issues of down payment come into focus. Those down payment scenarios are common in several types of business finance including equipment financing, acquiring rolling stock, and of course, commercial mortgages that require owner equity. One other factor to consider, and it's always a big one in discussion with our clients is the necessity of personal guarantees on business loan transactions.

Those ' PG's ' not only affect the approval of the small business loan but can alter the interest rate as well depending on the personal credit history and net worth of the guarantor. Canadian chartered banks place a large reliance on personal guarantors. In certain cases both approval and rate might also be determined via the personal guarantee of another related or non-related party. One other key factor in the rate determination of the bank or non-bank commercial lender is the term of the loan, which might be a multi-year amortization, or, at the other end of the spectrum a short term bridge loan.

Fundamentally it's all about your risk profile but don't forget also there are a variety of both traditional and alternative lenders in Canada- all of whom have different lending guidelines and structures. Companies who qualify for bank financing in Canada (Spoiler alert - not everyone does!); Bank loans for small business  tend to focus on amortized life of loans and the fixed/variable conundrum. The current low rate environment is a boon for those who qualify for bank financing.

Covenants, ratios and documentation required should always be a part of any commercial borrower’s consideration. Whether it's a bank or a commercial finance company we've certainly observed that the majority of borrowers tend to prefer to deal with a lender with a local presence. Is size everything? Quite frankly when it comes to the interest rate for a small business loan in Canada or cash flow finance solutions ' size ' does play an important role in both rate and approval.

Interest rate pricing will vary based on credit facility/loan size as well as the amount and type of debt you have on your balance sheet. It's important to understand that different types of financing in Canada support different goals - that might be one of the combinations of growth, working capital, expansion, and even acquisition.

In many cases firms opt for a complete refinancing of existing facilities. What then are different types of small  business loan  financing that support your firm’s goals? Note also they all have different rates and structures that will determine rates for small business loans.

SME COMMERCIAL FINANCE


The small to medium-size enterprise makes up the largest part of the overall economy in Canada, with well over a million businesses participating in the business landscape. At 7 Park Avenue Financial we deal with many firms who are in start-up or early phases of their growth - it's this segment that is the most challenged when it comes to finding the right finance solution as well as costs around the financing. Whether its day to day operation funding or exploration of growth opportunities cash remains .. king!

Canadian banks of course offer unlimited financing solutions coupled with the lowest costs. Unfortunately, when it comes to bank loans for small businesses thousands of firms find themselves unable to meet the requirements of a traditional lender - those requirements being clean balance sheets, profits, cash flow generation, and quality personal guarantees and external collateral. For that reason the rise of alternative finance Canada has been somewhat meteoric!

 

BUSINESS FINANCING SOLUTIONS


A/R Financing


Inventory loans 

Sale Leasebacks

Equipment financing

SR&ED Tax credit financing

Commercial mortgages

Non-bank asset based lines of credit

Bank credit lines/term loans



Royalty financing

 
Unsecured Cash flow loans 
 
 
    
 

KEY POINT:  

Institutions such as banks and other commercial finance companies will calculate financing around variable rates based on the prime rate - these rates are of course set around the general market and economic conditions - companies with good commercial credit history and financials will have a smaller markup to those benchmark rates.

It is very safe to say that overall business financial history, quality of the personal guarantee, and the type of collateral held are the key determinants in business financing.

GOVERNMENT OF CANADA SMALL BUSINESS LOAN - The FEDERAL BUSINESS LOAN

 

Borrowers in the SME COMMERCIAL FINANCE sector might well find that the most accessible traditional bank type financing that comes with a low cost of funds are government-guaranteed loans with the facility offered by INDUSTRY CANADA, an arm of the federal government. This is a loan support program that is used by close to ten thousand businesses every year for firms that are primarily starting up or in earlier stages of growth.

Statistics from the government available for recent years show almost 1 Billion dollars of loan financing generated annually under the program. The program is a solid way to reduce long term capital investments with financing that matches the useful economic life of assets required by the business.

KEY FACTORS TO CONSIDER IN THE CANADA SMALL BUSINESS LOAN GOVERNMENT GUARANTEED FINANCING PROGRAM

 

Numerous attributes of the loan include the fact that the majority of the loan is guaranteed to the banks by the federal government. Typically any assets you have purchased within the last 6 months, as well as of course new assets can be refinanced or financed if new. Rates are based on a floating rate over prime and monthly payments are made on a blended basis of principal and interest. Term of the loan can be anywhere from 2-7 years - at 7 Park Avenue Financial the majority of our clients opt for a 5-year term.

Confusion around the program can sometimes revolve around the fact that only assets, leaseholds, and real estate qualify for financing under the program. Here it is important to know that Canada's non-bricks and mortar entrepreneur bank can offer cash flow and working capital loans. When you are considering either of the two government-based loan programs experts advise that you should work with a qualified Canadian business financing advisor who can assist you with your government loan needs and who has experience in the area.

The ability to submit a quality loan package utilizing the experience of an advisor helps in guaranteeing loan approval and rates commensurate with the two government offerings.

SHORT TERM WORKING CAPITAL LOANS


Cash flow/working capital financing loans are currently extremely popular in Canada. They are easily accessible, often require little or no collateral guarantee, and are usually repaid over a 1 or 2 year period. While the annual percentage rates are high on these loans thousands of small business owners have found these types of loans as cash flow lifesavers. Firms that have any sort of reasonable credit and sales history can easily qualify for these loans, on which loan amount is typically based around a maximum of 15-20% of your annual sales.

In some circles, these loans are commonly known as business merchant advance loans, and came up to Canada via a business model originating in the U.S. Your company’s track record and financials will play a key role in obtaining any commercial financing Note also that you firm might have a ' Senior lender ' - typically a bank or commercial finance company, as well as utilizing the financing services of other ' niche ' based lenders, some of whom are profiled above in our list.

While some may view alternative finance solutions as ' expensive' remember also that they will always be cheaper than surrendering equity ownership? Alternative financing solutions can help firms who are challenged or on the verge of distress, which obviously is a key factor in higher rates It's always about the ' risk ' undertaken by our traditional or alternative lender.

Our bottom line is that there is no one single interest rate on any type of business loan, but diligent borrowers, combined with advice from qualified advisors can help you achieve the most reasonable rate from any traditional or alternative lender.

WHAT'S MY RATE?!

SUMMARY OF KEY ISSUES AROUND THE BUSINESS LOAN INTEREST RATE



1.Rates on business loans will vary from very low bank rates to higher rates offered by non-bank commercial lenders.

2. In general, each financing rate will be competitive within the loan type and lender in Canada.

3. A number of key factors will ultimately determine overall loan cost around a debt finance solution

4. There is no one 'average loan rate ' due to competing traditional and alternative lending solutions

5. The way in which a lender expresses/calculates the rate can be confusing to the commercial borrower

6. Understanding loan type and lender type will help the business owner and financial management to assess rate

7. Traditional rates by banks and insurance companies, etc will almost always be lower than alternative financing

8.When it comes to ' alternative financing access to capital and speed of funding increases as well as does the rate

If you want to better understand the not so secret truth about a Canadian small business loan and business finance interest rates, seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with the best loans and finance solutions that match your firm’s needs.

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

7 Park Avenue Financial/Copyright/2020
































Business Financing Interest Rates & Loans In Canada

Thursday, May 21, 2020

Business Credit Needs ? Working Capital Via Alternative Financing Sources


















Business Financing Alternatives In Canada






Business credit requirements involve securing external additional business capital for your company. That involves working capital as well as appropriate finance for a business that might come from traditional Canadian chartered bank financing or alternative lending solutions.

No secret that every business, even larger corporations, eventually finds itself in a situation where it needs to secure additional capital. It doesn’t matter if it’s a startup trying to get itself off the ground or an established company looking to cover a cash flow gap. The point is that having reliable access to working capital is crucial to your business and its success.

Solutions might come from working capital loans or for larger businesses term loans can mezzanine type cash flow loans. Another key focus for many growing companies is to monetize current assets, typically a/r and inventory, that will allow you to cash flow your sales as you grow revenues.

Entrepreneurs , Business owners and their financial mgrs looked to alternative lending sources when a traditional banking solution won't deliver on your ' cash flow gap '. That is whey alternate lenders have become increasingly popular in times of crisis or economic uncertainty.

Business credit needs are anything if not... consistent! In many cases the access to capital/ loans/ financing is one of the biggest obstacles to growth for a large section of companies constantly searching for SME COMMERCIAL FINANCE solutions. So how does the owner/mgmt ensure they access to commercial financing needed to grow the company. Let's dig in.

When new clients at 7 Park Avenue Financial discuss their financing needs they typically have three questions :



What are our financing alternatives?


Which are the best financing options


Can we finance working capital without a loan or taking on external term debt

What is working capital?


Let's discuss some potential solutions? When we're talking to clients we discuss the need first, not the solution! Thankfully those needs can be nicely broken down into several categories as follows: day to day operating capital, immediate growth needs for new opportunities, equipment and asset acquisition, hard asset refinancing.



Business Credit Lines - These facilities aren't necessary emergency facilities, they should be sought after and used by every business. Whether it's business credit cards for smaller businesses or business line of credit canada revolving facilities or non bank asset based lines of credit it's all about a day to day operating facility that works for your company. Approval lead times for these facilities are much shorter than when your firm contemplates longer-term loans from a senior lender.

In smaller companies a lot of the approval focus on these facilities hinges on the personal credit of the owner as it relates to credit scores, etc.

Receivable Financing - The ability to finance your invoices as you generate sales is a very attractive option for most SME firms in Canada, There is literally a renaissance of a/r financing solutions that allow you to cash flow sales as you generate revenue. Typical advances against your sales are in the 90% range. At 7 Park Avenue Financial we recommend Confidential Receivable Financing as the most effective solution.

Short Term Working Capital Loans - These loans have exploded onto the Canadian marketplace and are a popular borrowing option. The loans are typically in the range of 10-20% of your firm's annual sales and are repaid according to your business cash inflows, so that might be weekly or monthly as an example. These are unsecured loans with no external collateral required, although the lender might choose to register a financing statement against your business under Canada's PPSA laws. Important to note also that this type of business finance should not be considered if your firm is in a downward sales spiral .

Unsecured Cash Flow Loans / Mezzanine Financing - This funding option requires no external collateral or pledging of business assets. Naturally, your company must demonstrate it has a history of solid cash flow performance, with the loans typically tied to a 3-5 year maturity.

The common ' go to ' solution in the eyes of ownership/mgmt is to solicit chartered bank financing in Canada. If your firm has a strong balance sheet, profits, established history and additional collateral etc you'll find all the financing you need from our chartered banks who have virtually unlimited financing potential.

That's easy for us to say, but the majority of clients we meet simply can't qualify for all business credit and working capital they need to survive and grow. Typically they have some traditional financing but not enough, or, in a more severe case, do not qualify for traditional bank lending in the Canadian landscape. So what's the plan

When the going gets tough, the tough get going goes the expression, so it is a case of getting somewhat ' creative' in your search for working capital. If your firm has assets and growth prospects we firmly believe you can get most, if not all the financing you need.

Alternative Lending Solutions - Risk / Reward


Alternate financing for many firms in Canada, particularly in times of economic or industry crisis may provide the only business capital for your company. It's accessible, comes with a larger level of flexibility, and almost always comes with faster approval times when compared to traditional bank financing.

However, interest ratesand other terms should always be considered when looking for the best business financing option.

Asset based and cash flow monetization strategies can be achieved in a number of ways. This includes monetizing your current assets via a working capital facility for receivables and inventory. Properly set up you should congratulate yourself - You just negotiated unlimited working capital! The reason? These facilities allow you to borrow on an ongoing basis relative to the size of your current asset investment in accounts receivable and inventory.

We referred to the generalization of terms such as cash flow, working capital , etc - the lending we have just described is best known as asset based lending, and in many cases can cover off purchase orders and new contract financing also.

What about acquiring new assets for your business? Equipment financing and sale-leaseback financing for either new or owned/unencumbered equipment are great solutions to acquire or refinance capital acquisitions. In Canada lease financing is available for all asset and credit qualities for any amount, from small amounts to transactions in the millions of dollars.

Although the majority of clients we discuss working capital needs with are private firms your firm might be public, as a result, you might be in a position to consider an equity line of credit, with the equity questions being your stock.

If your firm has revenues under 5 Million dollars and is privately owned you should consider the best financing available in Canada - it's the government BIL/CSBF loan that is underwritten by our good friends in Ottawa., Industry Canada. This program is the Canadian equivalent of the U.S. ' SBA' loan program.

Note that these Government loans are available for hard assets such as equipment, leaseholds, real estate, etc. You can even be a start-up and qualify. The financing rate is incredibly attractive, guarantees are limited, and terms and structure flexible. This program is one of the great secrets in Canadian business financing.

It’s always about the bottom line, so what’s our bottom line today? Focus on what type of financing you need, determine if you qualify for traditional financing and if you don't get creative with a multitude of solutions available in alternative business solutions for business credit and working capital.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a financing track record of success.




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.