Successful Business Funding Via Loans & Finance Options You Can Access Today !

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YOUR COMPANY IS LOOKING FOR CANADIAN BUSINESS LOANS AND WORKING CAPITAL FINANCING! 

COMMERCIAL LENDING SOLUTIONS  & FINANCING OPTIONS YOU CAN ACCESS TODAY

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

        Financing & Cash flow are the biggest issues facing business today

                              ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

 

 HOW FINANCING & FUNDING CHOICES PROPEL BUSINESS FORWARD FOR GROWTH AND SUCCESS

 

Business Loans & Finance Options: Funding & Financing Businesses In Canada

 

 

Business loans and financing for their company must surely make some owners/financial managers feel like there is some 'conspiracy theory' out there relative to their ability to successfully access finance options and small business loans &  funding solutions.

 

Our point of view? That doesn't have to be the case for small businesses in Canada, so when it comes to ' how to get a business loan ' and raising capital.. let's dig in!

 

INTRODUCTION

 

Business owners know that financial resources can be the driving force propelling your company's expansion and prosperity. External funding can't be overstated in the pursuit of your objectives. This article delves into distinctive financing alternatives that cater specifically to Canadian businesses, each presenting its unique benefits and pathways to acquiring the capital you need to run and grow a business and meet business expenses with relative confidence.

 

 

By the way, small businesses aren't as small as you think - for infomatiion on what Canada's government considers  ' small ' click here for that info.

 

Understanding your business's overall cash and capital needs is often the root issue in small business financing  - how to finance outstanding accounts receivable and inventory via suitable commercial loans.

 

Those are the key drivers of any working capital loan need. 

 

 

A HOLY GRAIL OF SUCCESSFUL BUSINESS FINANCING?

 

The 'holy grail' of financing and funding your business? Growing your business, reducing inventories and turning them faster, and increasing receivable collections.

 

Cash flowing your accounts receivable either via more efficient methods of collection or selling your receivables as you generate them (invoice discounting or factoring) is the most optimal way to generate working capital financing.

 

Naturally, the challenge in doing all that is to ensure you can still maintain your projected sales and profit growth!

 

If your company always has a significant inventory investment, you can obtain direct loans in Canada against that inventory. Traditionally, bank financing via bank loans is the route much larger and established businesses take when they require working capital for inventory purchases.

However, when your firm can't qualify for the full extent of financing that you need from a bank loan, then a direct inventory working capital loan is best. It's as essential to understand that you have options as alternatives to bank loans for small businesses.

 

 

  

TRADITIONAL FINANCING / BANK FINANCING  

 

Bank loans have traditionally been a primary funding source for small and medium-sized businesses (SMEs) in Canada.

 

These loans offer several advantages, such as allowing ownership via financing that is non-dilutive, attractive interest rates, and tax-deductible interest payments. However, getting approved for a bank loan can be difficult for some business owners, particularly those lacking a solid business plan or credit history. Enhancing your prospects of getting a desirable bank loan involves careful preparation, including maintaining current financial statements.

 

 

THE TREMENDOUS RISE OF ASSET-BASED LENDING SOLUTIONS  IN CANADA 

 

When conventional bank financing loan solutions are hard to secure, alternative financing methods can offer a solution. A/R Financing and short-term workings capital loans are notable among these options, delivering rapid approval.

 

While alternative finance solutions may involve higher charges and interest rates, they can provide a crucial financial boost for companies wrestling with cash flow troubles or navigating slow business phases, seasonality and business cyclicality challenges.

 

Because asset-based loans focus on your assets versus cash flow or profit-based lending rules, the rise of ' ABL ' has been tremendous in Canada when businesses need to retrench and sometimes restructure.

 

Using your sales  ( via accounts receivable )and assets as loan collateral appeals to many business owners when they are challenged regarding access to business capital. The form of financing is the ultimate in maximizing liquidity, allowing them to recover, even during pandemic/covid times !.. and focus on the re-growth of their company via the benefits of alternative lending compared to potentially inaccessible solutions from traditional financial institutions.

 

Our recommended working capital loan does not add debt to your balance sheet.  The business owner's ability to manage the balance of debt and equity is key to long-term success. While business loan rates are higher in alternative finance, they provide all the capital you need to succeed  if you have the following: 

 

 

Assets

Sales Revenues

 

It's a facility which margins your receivables and inventory to proper market valuations. This generates the additional cash flow and working capital you are looking for and, as significantly, doesn't add debt to the balance sheet.  Companies that can't access any or all of the operating cash need these 'Asset-based Non-Bank Lines Of Credit' - the golden solution for finance for entrepreneurs.

 

The best way to generate your working capital loan for your firm is to improve collections and delay supplier payments. The latter must be done carefully to avoid mismanaging vital supplier relationships.

 

However, it's every man and woman for themselves when it comes to business financing, so you should focus on negotiating the best payment terms with valued suppliers who usually extend solid payment terms when they see you as a viable and long-term customer.

 

  

GOVERNMENT FUNDING   

 

The Canadian government provides numerous financial support mechanisms to aid businesses in diverse sectors. Specific grant programs and tax relief initiatives are designed for different purposes.

A  benefit of government grants is the absence of repayment or equity relinquishment requirements, which strengthens your business reputation and improves possibilities for subsequent funding.

Moreover, the Canada Small Business Financing Program assists businesses in procuring loans from financial establishments through government risk-sharing loans with banks. Canada's largest

Business owners should also investigate Canada's SR&ED Program - which provides business capital for research and development.

 

 

 

GOVERNMENT SMALL BUSINESS LOANS

 

Some business folks, particularly start-up and earlier-stage companies (including franchises), should check out the Canadian Government Small Business Loan Program, which has the federal government guaranteeing the central part of your loan.

 

It's a great solution when a business borrows money for the business needs of early-stage companies in Canada. If you need a startup business loan, this option is a solid solution versus a traditional bank loan.

 

  

THE SHORT RECAP ON GOVERNMENT LOANS : 

 

Attractive  rates

Nominal personal guarantees

The loan can be paid back at any time without penalty

Fluid structures and repayments re terms, etc.

 

It's no secret that thousands of new and emerging private companies successfully access this program every year - it's also solid financing to buy a business in Canada for smaller acquisitions or franchises.

 

Financing a business is one of the most important things a company needs to succeed, but not all startups or early-stage firms have the option to work with traditional banks. That's why small business financing options that replace traditional bank solutions work!

 

The downside to the Government loan program is that many businesses are not seeking the asset or leasehold financing the Government ' SBL ' loan program provides. They're looking for cash flow and working capital sources as a commercial loan solution at a reasonable interest rate.

 

Startup business loans extensively use the ' SBL LOAN' in Canada. New business loans in traditional banking heavily emphasize the owner's personal net worth and credit score.

 

The credit history of small business owners is always key when applying for traditional financing. Unsecured business loans don't collateralize specific assets but are guaranteed to lenders through personal guarantees and blanket security agreements.

 

Believe it or not, working capital loans are available from what people consider traditional sources. One of the Crown Corporations within the Canadian government focuses very significantly on cash working capital loans. These loans are structured as term loans, not as a business line of credit, and have fairly competitive rates and repayment terms of 5 to 6 years. They are also unsecured, which means they rank behind any senior lender or security you might have in place.

 

A business plan is both recommended and almost always required for the govt ' SBL business loan '  - Business plans prepared by 7 Park Avenue Financial are focused on conservative financial projections and are laser-focused on loan approval.

 

Businesses often consider ' government loans' cumbersome and challenging to apply for - At 7 Park Avenue Financial; we're here to guide you through those programs and ensure you are working with the right financial institution.

 

The only commitment to repay is the company's guarantee as a promise to pay and a full or partial guarantee by the owners personally. We point out that the majority of business loans and financing in Canada does in effect, require some level of guarantees from the owner and a generally positive personal financial history of the owner(s).

 

To apply for a business loan is often daunting and time-consuming for business owners - let the 7 Park Avenue Financial team walk you through the loan process - we also prepare, when required, business plans that are focused on funding approval based on conservative and realistic financial projections and strong business and industry overviews.

 

UPDATE!

 

Significant changes came to the program in 2022 -  Types of financing available under the program were enhanced, and loan limits increased! 

Here is an updated recap of the program

The Canada Small Business Financing Regulations and Act were updated on July 4, 2022. These changes provide businesses and lenders with enhanced financing options, lower administrative burdens, and improved loan conditions. The program is now much closer to the U.S. equivalent under the U.S. Small Business Administration -

Here are the key amendments:

 

1. Increased loan amounts: Borrowing limit increased from $1 million to $1.15 million, including:

   • $1 million for term loans, a max of $500,000 for equipment and leasehold improvements (up from $350,000), and $150,000 for intangible assets and working capital.
   • Additional $150,000 for lines of credit for working capital.

2. New financing classes: Term loans can now finance intangible assets and working capital costs.

3. Extended loan terms: Loans for property, leasehold improvements, equipment, intangible assets, and working capital payments can be made for up to a term of 15 years.

4. Expanded eligible expenditures: The time frame to finance expenditures or commitments increased from 180 days to 365 days.

5. Adjusted appraisal timing: Appraisal timing has changed from 180 days before loan approval to 365 days before loan disbursement.

6. More extended registration period: Term loans can be registered within six months from the date of the first loan disbursement.

7. Updated security requirements: Lenders must take security in any assets of the small business for leasehold improvement, software, website, intangible assets, and working capital costs.

8. Simplified default process: Upon default, lenders only need to demand repayment, not provide a notice of default.

9. Adjusted claim documentation requirements: Documentation supporting cost and proof of payment reduced from 100% to 75% of the principal amount outstanding on the loan.

10. Line of credit introduction: Lines of credit for working capital costs can be made, with maximum term of 5 years.

11. Line of credit renewal options: Renew the line of credit for a new 5-year period, convert to a term loan, or repay with a conventional loan.

12. Updated line of credit security: Lenders must take security in any small business assets for the authorized amount of the line of credit.

13. Line of credit default process: Similar to term loans, lenders only need to demand repayment upon default.

14. Line of credit claim process: Lenders are not required to substantiate the cost and proof of payment for expenditures on the line of credit.

 

The program can also be used to purchase an existing business/franchise.

 

These changes are designed to improve the financing landscape for Canadian businesses, providing them with greater access to capital and increased flexibility in managing their financial needs.

 

 

 

EQUIPMENT FINANCING

 

If your business is looking to procure crucial machinery or equipment, or technology, equipment financing can be an excellent strategy. By distributing expenses over the lifespan of the assets, this form of financing helps to minimize the impact of substantial initial investments, thereby allowing entrepreneurs to reserve capital for other business-related necessities.

 

Whether the requirement is for updating assets or upgrading technology, or obtaining rolling stock, equipment financing allows businesses to maintain competitiveness and stimulate expansion.

 

For more information from 7 Park Avenue Financial equipment financing solutions, please  click HERE

 

  

 

CONCLUSION :

 

In Canada, entrepreneurs have various financing options, including traditional bank loans, alternative financing, equipment financing, government loans and grants.

Each option addresses different business needs. To obtain the necessary capital for growth and prosperity, Canadian businesses must carefully assess the advantages and drawbacks of each method and plan accordingly. 

 

Talk to the 7 Park Avenue Financial team about choosing the right financing option to realize your business ambitions and secure prosperous growth financing.

 

Bottom Line? Whether you are starting a business or already established and focused on high growth and those options from angel investors/family and friends have dried up, and venture capital funding that was never in reach is gone, the type of financing you need is available if you understand different choices in traditional and alternative lending. Choose the right financing for your business via finance tailored to your needs.

 

Whether you are looking for short-term financing or long-term viable business finance strategies, business owners should understand that ' Real-world ' accessible financing is no conspiracy theory.

 

Speak to  7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor in financing for small businesses who can assist you with your funding and financing success needs in term loans, asset-based loans, and cash flow/working capital business needs - Let's achieve the growth potential you're capable of with business advice you can trust.

 

 FAQ: FREQUENTLY ASKED QUESTIONS 

 

Who is eligible for the Government Small Business Loan?

Businesses applying for the govt small business loan should have under 10 million dollars in revenue. Owners should be able to demonstrate a positive credit history and be legally allowed to borrow in Canada via either citizenship or landed immigrant status as a key business loan requirement.

 

What is asset-based lending?

 

Asset-based lending is secured lending when loans are focused on your first assets. Asset-based business lenders' loans are based on the current value of your sales and assets - the most common asset categories are accounts receivable, inventory, equipment, and even real estate. The focus on collateral versus cash flow liquidity provides much more borrowing power for business borrowing.

 

Do banks give loans to startups?

 

Banks will lend to startups unsecured because business owners can provide an acceptable personal guarantee and demonstrate sufficient net worth and good personal credit history. Banks will secure these loans via a personal guarantee and a blanket security agreement over the entire business. Interest rates will be determined by the type of financing the bank provides.

 

How do I qualify for a business loan?

Businesses should have good overall credit quality, and owners must have good personal credit scores and credit history. Knowing the types of financing available through traditional and alternative sources is essential, as is understanding requirements. A good loan package application should include a strong business plan.

 

 

How do I get financing options for my business?

 

Steps to Secure Financing for Your Business:

1. Assess Your Financing Needs: Determine the amount of capital required and the purpose of the funds.

2. Review Your Credit and Financial Health: Check your credit score and gather financial documents for evaluation by lenders.

3. Explore Traditional Financing Options: Approach banks and credit unions with a comprehensive business plan and loan proposal.

4. Research Alternative Financing: Consider online lenders, peer-to-peer platforms, or venture capital firms if traditional loans don't meet your requirements.

5. Look into Government Funding and Grants: Check for available government programs or grants specific to your industry or business type.

6. Explore Angel Investors and Venture Capital: Present a compelling business plan and pitch to potential investors for equity funding.

7. Network and Seek Recommendations: Seek advice and referrals from your professional network and experienced entrepreneurs.

8. Prepare a Strong Loan Application: Organize all required documents and clearly explain fund usage and repayment plans.

9. Be Open to Negotiation: Be flexible during negotiations with lenders or investors for mutually beneficial terms.

10. Exercise Caution: Research potential lenders to avoid scams or predatory practices.

Remember to be patient and persistent during the process, as securing financing may take time. Careful planning and preparation will increase your chances of finding the right financing option for your business needs and goals.

 

 

What is the most common type of business loan?

 

Summary of Key Features of Traditional Term Loans:

• Offered by banks and financial institutions.
• Repaid over a fixed term with regular monthly installments.
• Comes with a predetermined interest rate for predictable payments.
• Involves a fixed loan amount given to the borrower.
• Collateral may be required to secure the loan.
• Credit history and financial health are considered during the approval process.
• Borrowers need to provide a detailed business plan and financial statements.

Other Financing Options to Explore:

• Lines of credit
• SBL loans under a defined credit limit under the CSBF program
• Equipment Financing
• Invoice financing

Business owners should consider various financing options to find the best fit for their needs and circumstances.

 

 

What are the 3 main types of financing for businesses?

 

Summary of Main Types of Financing for Businesses:

1. Debt Financing:

• Borrowing money from external sources with an agreement to repay with interest over a specific period.
• Examples: term loans,  business lines of credit, equipment financing, merchant cash advances via a term loan monthly installment credit limit solution - The application process is very quick for most lenders in fintech

2. Equity Financing:

• Raising capital by selling ownership shares to investors or a venture capitalist
• Investors share in profits and losses; no repayment is required.
• Commonly used by startups and high-growth companies.

3. Self-Financing / Personal funds (Bootstrapping):

• Using personal savings, assets, or business profits to fund operations versus taking on debt under startup loans
• Retains full control and avoids debt or equity obligations.
• May limit growth for capital-intensive ventures.
•  

Businesses often use a combination of these financing methods based on their stage of development, financial health, growth objectives, and risk tolerance of the business owner.

 

 

How can an entrepreneur obtain startup financing?

 

Common Ways Entrepreneurs Can Secure Financing:

1. Self-Financing (Bootstrapping): Using personal savings, assets, or business profits to fund the venture.

2. Traditional Bank Loans: Borrowing a lump sum from banks with fixed repayment periods and interest rates.

3. Online Lenders: Utilizing online platforms for faster approval and flexible criteria.

4. SBL Loans Via the Canada Small Business Financing Program: Government-guaranteed loans with favourable terms and flexible

5. Angel Investors: Getting funding from affluent individuals in exchange for equity.

6. Venture Capitalists: Securing funding from investment firms for high-growth startups.

7. Crowdfunding: Raising funds from many individuals contributing small amounts.

8. Family and Friends: Seeking financial support from close contacts for the business's success

9. Government Grants and Subsidies: Exploring non-repayable funding from governmental programs versus personal loan financing solutions

10. Accelerators and Incubators: Joining programs that offer funding, mentorship, and resources.

11. Business Competitions: Participating in competitions for cash prizes or investments.

To succeed in obtaining financing, entrepreneurs should have a well-prepared business plan, understand their funding needs, and demonstrate growth potential and profitability. Building relationships with investors and actively seeking funding opportunities can increase their chances of success.

 

What is the least costly source of financing?

 

Advantages of Self-Financing - Also known as "bootstrapping."

1. No Interest Payments: No borrowing means no interest expenses, reducing overall financing costs.

2. No Equity Dilution: Entrepreneurs retain full ownership and control without sharing profits or decision-making.

3. No Debt Obligations: No regular loan payments, beneficial for businesses with limited cash flow who cannot pay interest on the debt  - Interest rates and other business lender requirements tend to be higher for startups.

4. Flexibility and Autonomy: Entrepreneurs can make decisions without external pressures.

Limitations of Self-Financing:

• Limited Capital: The amount available to borrow money may restrict business scale and speed of growth.

• Not Suitable for Capital-Intensive Ventures: This may not suffice for businesses with high financial needs.

• Growth Constraints: Rapidly expanding businesses may require additional external financing.

 

Entrepreneurs often explore a mix of financing sources as their business evolves and funding needs increase to align with their goals and financial capabilities.

Alternative Financing Business Loans In Canada: A Smarter Working Capital Solution For Growth Financing ?

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YOUR COMPANY IS LOOKING FOR  BUSINESS ALTERNATIVE  FINANCE SOLUTIONS!

Breaking Boundaries with Alternative Finance: The New Face of Business Loans

 

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

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CONTACT:

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

 

BUSINESS FUNDING OPTIONS IN CANADA OUTSIDE THE TRADITIONAL FINANCE SYSTEM 

 

Business Loans in Canada come from ' traditional ' or alternative loans and working capital sources.

 

  

INTRODUCTION TO WORKING CAPITAL / CASH FLOW SOLUTIONS VERSUS TRADITIONAL FINANCING  

 

Around the time of the 2008 financial crisis, the nature of business financing and access to capital changed in Canada - a lot .. and can we not even talk about the Pandemic, please! Traditional lenders in Canada consolidated and somewhat retreated from SME financing in Canada. Alternative lenders have stepped in over the last number of years to fill the void, offering  Canadian business financing solutions that are accessible when compared to a traditional business loan.

 

For any business, large or small, access to business capital is critical - As a company's needs evolve, it is more evident than ever that non-bank business financing can provide every type of finance a business needs to grow. Let's dig in on the types of working capital and cash flow solutions you need.

 

Working capital and cash flow loans exist in more abundance than ever. So if you're a business owner or financial manager looking for help with small business financing outside of other companies' traditional thinking, let's dig in on types of business financing that make sense for your company!

 

  

  

UNDERSTANDING ALTERNATIVE FINANCE AND THE ROLE OF  TRADITIONAL LENDING VERSUS ALTERNATIVE FINANCING    

 

Alternative financing offers a large variety of Canadian business finance solutions; these include short-term working capital loans,  receivable financing solutions, non-bank business lines of credit, asset-based financing, and tax credit financing for r&d of film projects.

 

Traditional lending often entails complex application processes and strict requirements, with approvals primarily based on credit rating. Conversely, alternative financing offers a more accessible route with a streamlined online application process, faster turnaround, and a focus on a business's potential, making it an attractive option for businesses seeking swift, reliable funding.

 

 

Historically business owners and financial managers with SME COMMERCIAL FINANCE   asset finance and working capital needs worked through traditional channels, almost always' the bank. '  These firms traditionally don't have access to bank loans or the capital markets/venture capital. Given up on equity crowdfunding? So have many others! And don't forget equity funding will always demand a small percentage of your business - if not more!

 

Competition and efficiency in the Canadian lending markets have brought several new and different types of alternative capital solutions to your business - the challenge is knowing which is the right good option for your company and how one accesses capital in this manner.

 

UNSECURED LINES OF CREDIT

 

The golden solution in the past has been 'unsecured bank lines of credit ', focusing on companies with proven cash flow, great balance sheets, and good history for companies and owners. The problem is that thousands of firms, maybe yours? ... can't meet all those requirements, as logical as they might seem (if you're a banker).

 

Numerous alternative cash flow sources have grown steadily in Canada - one of the fastest-growing is in the area of receivables finance/invoice finance/invoice discounting,  where the ability to use your sales as collateral via business A/R overall credit rating is the appeal.

 

  

FINANCING OF WORKING CAPITAL  

 

Some great solutions are derived from this method of invoice factoring for business owners via the financial channels of a third-party factoring company for accounts receivable. For example, historically, your clients had to be notified of this process and financing. Not so fast, though! Utilizing Confidential Receivable Finance for unpaid invoices - acting as almost a bridging loan that allows you to generate immediate cash flow as your business sells and generates revenues while giving you the option as your firm takes responsibility to bill and collect with no notification to other parties as customer pay.

 

 

A factoring company, via accounts receivable factoring/ invoice financing, is, in fact, one of the most popular funding as an example of non-bank lenders who provide alternative funding.  Unlike banks, each  A/R  financing solution has its own benefits, so talk to the  7 Park Avenue Financial team about what suits your business model when you're looking for easier access and a streamlined approval and application process.

 

EQUIPMENT LEASING SOLUTIONS

 

When acquiring assets for your company (equipment, technology, vehicles, software, etc.) Equipment leasing is a bit unique in that it embraces both traditional forms and alternative finance needs. Almost any asset can be financed with considerable flexibility regarding monthly repayments, amortizations, prepayments, down payments, etc. Interest rates are very competitive regarding equipment lease financing - as well as it is a solid alternative to a bank loan with more stringent credit requirements in the traditional financial system.

 

That is what small business owners want to hear!

 

Clients often ask us why we are so bullish on alternative financing solutions. For a starter, don't get us wrong - Bank financing in Canada has a low cost, has a lot of flexibility, and provides virtually unlimited access to capital. Still, when it comes to unsecured business loan requirements, many firms can't meet bank criteria for borrowing.

But when ' the bank says no, '   working capital loans and asset monetization strategies from alternative lenders might work.

 

But reality sets in when many business folks realize that banks prefer ' upstream ' - namely, more significant deals with high-quality credit companies. Top experts tell us that one recent survey indicated over 40% of firms in the small to medium enterprise sector in Canada don't fully qualify for bank financing.

 

 

 ALTERNATIVE  FINANCE PRODUCTS / SOLUTIONS  

 

Alternative lending solutions are available for a broad range of business finance needs. Each type of financing suits a specific need around cash flow and working capital that help to fund business growth and profits.

 

P O financing

 

Tax Credit Financing (sr&Ed / film and TV)

 

Leasehold Improvements Financing

 

Condominium Corp Finance Loans

 

Management buyouts/acquisitions

 

Commercial Property Finance

 

Non-bank Asset-based business lines of credit

 

Bridge loans against real estate and equipment

 

Working capital short-term loans - Initial loans are typically based on a percentage of your sales financial history - Online lenders/peer-to-peer lending sites often offer this solution, also known as a merchant cash advance. Your business agrees to repay the loan on repayment terms that are on a typically fixed installment basis. Good owner credit history/credit score required.

 

It's no secret that organizations such as the CANADIAN FEDERATION OF INDEPENDENT BUSINESS.  Companies consistently cite that the SME COMMERCIAL FINANCE  needs of the Canadian economy always focus on the lack of and access; to.. more capital!

   

The Power of Alternative Lending: Empowering Businesses   

 

 

Many business owners and financial managers find their firms turned down by traditional bank financiers and are sometimes unaware of the criteria for SME borrowing in Canada when they want quick access to funding.

 

Small and medium-sized businesses must understand that traditional banks type financing will always revolve around the ' infamous ' 5 C's of business credit -

 

 

  

THE 5 C'S OF SMALL BUSINESS FINANCING APPROVAL   

 

Character

Capacity

Capital

Collateral

Conditions

 

Sometimes, you may want to ensure you have a solid business plan. The 7 Park Avenue Financial team prepares business plans that meet and exceed bank and commercial lender /alternative lenders' requirements. Startup funds and startup funding, in general, are difficult to access if you are not adequately prepared.

 

 

  

CONCLUSION - ALTERNATIVE BUSINESS FUNDING OPTIONS 

 

Canadian small and medium-sized business in Canada needs access to reliable sources of working capital - When conventional financing is not available and timelines to access traditional funding are long Canadian businesses can access alternative lending solutions that provide flexibility and ease of access to financing.  Alternative finance solutions are a compelling and needed alternative to traditional funding to support the growth of a business.

 

The bottom line?  Your business has finance alternatives for alternative lending solutions versus traditional financing for a financial product suited to your needs.  Business finance for small businesses in Canada will always be a challenge - but solutions do exist.

 

Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with business loans and working capital solutions that make sense for your company and industry.

 

FAQ: FREQUENTLY ASKED QUESTIONS

 

What is alternative finance?

.

Regulated banks and similar financial institutions are great for many businesses. Still, the criteria they impose on smaller firms often can be too much to handle regarding bank loan requirements for business. Alternative lending refers to the need for other financing options versus traditional financing options so small companies may thrive and prosper in their respective markets without being suppressed by an unfair playing field favouring larger enterprises with more resources than these small and medium-sized businesses and startups have access to presently.

 

Alternative finance is a well-utilized commercial financing vehicle for available funding when companies can't raise funds based on their trading history. Alternative finance/ structured finance refers to non-bank financing via p2p lending, 3rd party commercial lenders / accredited investors, hedge fund managers, etc., who lend money..typically at higher interest rates and who view this as an alternative investment in alternative asset classes.

 

 What is alternative financing for small businesses?

Alternative financing refers to non-traditional methods businesses can use to obtain funding versus a traditional bank loan. These methods deviate from traditional financial institution such as standard bank loans and traditional business financing, including merchant cash advances, invoice factoring, or an online line of credit. They are primarily utilized by small- and mid-sized businesses looking for flexible, fast, and more accessible funding solutions via alternative business lending.

 

How does alternative financing compare to traditional bank loans?

Unlike traditional bank loans, alternative business financing offers quicker approval times, less stringent credit requirements, and a more streamlined application process than conventional bank loans. While traditional loans can take weeks or months to process for a business looking for a small business loan, alternative funding sources often approve and deliver funds within a few business days. However, alternative financing can have higher interest rates and shorter repayment terms than traditional loans.

 

Why is alternative financing becoming more popular among small businesses?

Alternative funding for small business loans is growing in popularity due to its flexibility and accessibility compared to traditional bank financing. Small businesses often face challenges obtaining traditional bank loans, like rigorous credit checks, long approval times, and high collateral requirements. Alternative financing provides a solution by offering various lending products, including asset-based loans and invoice factoring, focusing on the overall business performance rather than just credit history.

 

What types of alternative financing options are available for small businesses?

A wide range of alternative business loans and financing options are available for small businesses. Some of the popular ones include merchant cash advances, where companies receive a lump sum in exchange for a portion of future sales via the working capital loan based on an annual revenue calculation; invoice factoring, where businesses sell their unpaid invoices to a lender for immediate cash; business lines of credit, allowing firms to borrow as needed; and asset-based loans, using a company's assets as collateral to secure the loan.

 

What factors do alternative lenders consider when approving a business for a loan?

The alternative lender will look at various factors beyond business and personal credit scores. Alternative business lending criteria can include time in the business/industry, monthly sales, cash flow, and overall health. In many cases, alternative business lenders use technology to evaluate these factors quickly and efficiently, making the application process faster and simpler than traditional methods.

 

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

Revolutionize Your Business Growth: Explore Canadian Business Loans and Debt Financing Options

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YOUR COMPANY IS LOOKING FOR BUSINESS FINANCING!

Discover the Power of Business Loans and Debt Financing: A Game-Changer for Canadian Entrepreneurs

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

Financing & Cash flow are the biggest issues facing business today.

ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

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

 

 

 

Maximize Your Business Potential: Unleashing the Benefits of Business Loans and Debt Financing in Canada 

 

 

Business loans in Canada come with certain rules around debt financing when done. Properly. Let's dig in.

 

 

INTRODUCTION:

 

 

For a company to be successful in running a business in Canada business financing is critical- Numerous  Canadian business debt financing options are available to help owners achieve growth goals, as well as manage cash and exploit new business opportunities.  We'll discuss those options as well as several government back programs as well as alternative lending options.

 

 TYPES OF BUSINESS LOANS IN CANADA

A:

1. Short-term loans are typically used to address day-to-day operational needs, such as working capital or cash flow management or to purchase inventory. These loans typically have terms of up to one year and may require weekly or monthly payments. Short-term working capital loans are readily accessible and available from numerous commercial lenders as well as online - The borrowing formula relates to the sales and credit history of the company and the credit score of the business owner. Typically these loans are more expensive.

2. Medium-term loans are often used for business investment and expansion, equipment and technology purchases, or refinancing existing debt. Repayment terms are one to five years, these loans provide more flexibility and often have lower interest rates than short-term loans which are much more expensive.

3. Long-term loans are ideal for financing large capital investments made in the business, as well they are suited for acquisitions. These loans can have repayment terms of five to twenty years and usually offer lower interest rates for businesses that qualify with the required amount of cash flow or collateral.

 

B. Lines of Credit

 

1. Revolving lines of credit allow a business to draw down funds for cash flow gaps  as needed, up to a predetermined credit limit. Businesses pay interest only on the outstanding balance based on the amount borrowed and drawn, and the credit line is replenished and revolves as the business repays the borrowed amount based on incoming receipts and cash inflows.

C. Asset-based Financing

1. Equipment financing or equipment loans are used for purchasing business assets. The equipment itself serves as collateral, reducing the lender's risk based on the collateral secured. Equipment leasing is used by over 80% of North American businesses in the purchase of assets.

2. Inventory financing provides businesses with the capital needed to purchase and replenish  The inventory itself serves as collateral, ensuring that the lender can recover their investment if the borrower defaults. Inventory financing is often combined with accounts receivable financing in a business line of credit solution.

 

Accounts Receivable Financing

 

1. Invoice factoring and invoice discounting allow businesses to sell outstanding unpaid invoices to a factoring company, which then advances a percentage of the invoice value. Under traditional factoring solutions, the factoring company assumes the responsibility of collecting the payments, while the business receives immediate cash.

2. Confidential receivable financing is similar to factoring, but the business retains control over collecting invoice payments. The lender advances a percentage of the invoice value, and the business repays the advance once the customer pays the invoice. With the company having responsibility for billing and collecting there is no notification to the client.

 

Mezzanine Financing  / Cash flow loans - Mezzanine finance is a hybrid of debt and equity financing, providing businesses with capital in exchange for a percentage of future profits or equity. This type of financing is ideal for businesses with strong growth potential but limited collateral - as well the company must demonstrate strong historical and present cash flow.

 

Commercial Mortgages -  Commercial real estate mortgages are used to finance the purchase of company-owned real estate, such as office buildings, retail spaces, or industrial properties.

 

 Merchant Cash Advances provide companies with a lump sum of capital in exchange for a percentage of their future sales. The merchant cash advance options are well-suited for retailers with high credit card transaction volume who wish to borrow money for short term needs /operating expenses.

 

  

HOW IS BUSINESS DEBT SECURED? THE PROS AND CONS AROUND COLLATERAL AND GUARANTEES  

 

For the most part, debt is ' secured ' - either by assets or cash flow, or both. For companies with solid, predictable cash flow, a company's promise to pay might be all that is required.  That is a rarer occasion. Debt financing is the alternative to equity financing. What types of debt financing work for your business?

 

By the way, ' unsecured' cash flow loans, also called ' Mezzanine,' almost always cost more, being the lender is ultimately unsecured, relying solely on the delivery of the cash flow promise - they are a hybrid form of debt financing. Different types of business loans vary based on whether they are traditional in nature or from the alternative lending landscape. ' Mezz' financing usually has a higher interest rate attached to the transaction and lenders want to see proven cash flows.

 

  

CANADIAN BANKS AND BUSINESS FINANCING  

 

Business owners will often consider bank loans from Canadian chartered banks as the optimal solution - certainly, it’s more often than not the ' go-to. ' However, not all business owners and financial managers understand the bank requirements around secured term lending. 

 

On the other hand, they also don't know there are alternatives. The small business owner should ensure they can demonstrate a good credit history and personal credit report profile - that is a requirement for different forms of financing.

 

  

HOW DO BANKS DETERMINE YOUR DEBT FINANCING CAPACITY   

 

From the bank's lending criteria perspective, POSITIVE CASH FLOW is a must for debt financing of any time. Formulas that have been in use forever for CASH FLOW COVERAGE and DEBT TO EQUITY are the key drivers in commercial debt financing. Bank debt is typically ' senior debt ' and is often has the bank in ' first position' over all other lenders.   Banks typically document this transaction under a loan agreement called a ' GSA ' - A general security agreement.

 

  

SOME FIRMS MAY HAVE A VARIETY OF LENDERS  

 

When we talk to clients about new debt financing options, one of the issues that always must be dealt with is relationships with other creditors. On occasion, this requires unwinding of agreements between lenders, requiring additional time to complete the financing required.

 

  

WHAT NEEDS DO BUSINESS LOANS ADDRESS? 

 

Business loans can finance various needs - these include:

Working capital,

Fixed and capital assets

Acquisitions

 

  

  

WHEN IS DEBT  ' TOO MUCH ' - THE DISADVANTAGES OF DEBT FINANCING    

 

The $64,000 question in debt financing is almost always how much debt can your business manage. Too much debt creates a highly leveraged company - Done right, it's great for ROI, done wrong... a recipe for business failure.

 

When accounting for debt on your balance sheet, term loans will always be broken down into current and long-term. The current is the total of the loan that will become due in the next year. On the other hand, revolving credit facilities simply... revolve... and are based on levels of inventory or accounts receivable, or both.

 

  

 THE DOWNSIDE OF DEBT FINANCE   

 

Debt is, of course, the alternative to equity - in a low-rate environment, the capital cost is low, and payback can more easily be justified - however, rates have started to increase substantially. The negatives relate to what we have already talked about:

 

Taking on too much debt

 

Potential business failure

 

Implications around personal guarantees

 

Payments are fixed - i.e. they must be made!

 

CONSIDER DEBT FINANCING VIA THE GOVERNMENT OF CANADA SMALL BUSINESS FINANCING PROGRAM FOR A TERM LOAN

 

Government-backed Loan Programs

 

A. Canada Small Business Financing Program (CSBFP) The' SBL LOAN '  provides loans to both new and small businesses for purchasing real estate, equipment, or financing working capital. The federal government guarantees a large portion of the loan, reducing the risk t financial institutions such as banks and credit unions who underwrite the program for the government. Thousands of small businesses utilized the program in Canada, allowing businesses to access capital at competitive rates where financing might otherwise not be available.

The Business Development Bank/ BDC  offers various financing solutions via term loans, commercial mortgages and equipment loans.

 

In  2022 significant changes were made to the Canada Small Business Financing program introduced major changes to the program with increased loan amounts and improved loan conditions - The maximum loan amount under the program was increased to 1.1 Million dollars and new financing classes around intangible assets, franchise fees, working capital and lines of credit were introduced.

 

A new financing product, the line of credit, was introduced for working capital costs, with a maximum term of five years. The maximum interest rate for lines of credit is prime + 5%, with a registration fee of 2% of the authorized amount and an annual administration fee of 1.25%. Other changes include provisions for the release of a guarantor, non-compliance, transfer of loans, and additional clarifications.

 

A good personal credit score from the borrower is required under this guaranteed loan program  - typically in the 650 range for a credit rating.

 

For the SME sector in Canada, the Government of Canada Small Business  Loan is a solid debt alternative that can be very attractive versus an unsecured bank loan and its various requirements. New businesses and start ups are particularly attracted to this loan. It's a bit similar to the SBA loans' offered in the U.S. under the Small business administration.  Why? It has attractive rates, repayment without penalty, and a lesser Personal Guarantee implication.

 

The advantages of debt financing always become more obvious when you have structured financing under flexible terms and conditions, as well as of course, the interest rate on your transaction. Business owners should make sure they understand various other benefits, such as the ability to pay back without penalty, etc. Interest payments can be calculated on a fixed or variable rate option for the monthly payment based on final loan approval.

 

Government SBL loans are for small business owners who want to achieve one of the best finance solutions for small business loans in Canada and are available from participating financial institutions such as banks and credit unions. Interest paid on debt financing is tax deductible for a business expense.  Two other crown corporations, Farm Credit and EDC provide financial support to the agriculture and export sector respectively.

 

At 7 Park Avenue Financial, we encourage business owners to separate personal assets from business expenses and needs, and a bad credit profile in your personal life will almost always affect SME borrowing success.

 

  

CONCLUSION - BUSINESS LOANS DEBT FINANCING 

Navigating the different types of business loans and debt finance solutions can be challenging for Canadian business borrower. Having the proper knowledge about what type of funding your business needs, as well as having the ability to compare loans is key to supporting business growth and long-term success.

 

Tired of wasting time searching for angel investors, VCs, family and friends, etc?!

 

For a proper explanation of the right type of business loans and business credit for small businesses, seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your debt financing needs.

 

 

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

 

What is the eligibility and application process around business loans and debt financing?

To apply for a business loan, lenders consider factors like credit history, business plan, collateral, and debt service coverage ratio. Debt financing costs and fees include interest rates, origination fees, prepayment penalties, and late payment fees.

 

To select the right loan, businesses should assess their needs and objectives, compare loan terms and conditions, and evaluate lenders and their reputations around issues such as competitive interest rates. Unlike equity financing debt interest repayment flexibility should always be considered when you choose debt financing for business finances. A business loan calculator is a useful tool to calculate finance payments, etc

 

 

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

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5 Things You Didn’t Know About Asset Based Lending in Canada

Asset-based lending in Canada – We’re discussing 5 things you didn’t know about ‘ABL Financing ‘ in Canada.

5 THING YOU DID NOT KNOW ABOUT ASSET BASED FINANCING

1. What is Asset Based Lending?
2. What does it Cost
3. How does it Work
4. For what type of firm is it perfect for
5. How to get such financing!


LET'S DEFINE ASSET BASED LENDING 

Asset-based lending and financing for your business is simply the utilization of your business assets for maximum business financing based on your business needs. Business owners and financial managers should understand that this is a replacement or specific financing as an alternative to either traditional financing ( via a Canadian chartered bank ) or to a firm that is unable to get financing that might otherwise be called traditional.  Firms in that category might include start-up operations or firms that have had business challenges. 

ABL financing is the utilization of your current and in some cases your long term business assets for the leveraging and monetization of working capital and cash flow. The current assets are almost always accounted receivable and inventory, and longer-term assets in some cases might include equipment or real estate that your firm may own – for example, owner-occupied premises.  

All assets must be unencumbered, that is to say that they should not have any liens or registrations against them, otherwise it would be difficult, if not impossible, to structure an asset based loan.
Typically the asset-based lender pays out any existing creditors and takes a charge against the assets being financed.

WHAT DOES ABL COST?

Does asset-based financing differ in cost to traditional financing? We have to use your lawyer’s typical answer (it depends) but the reality is that in Canada the costs of asset based lending are all over the map. In some cases they are actually lower than chartered bank financing; in most cases, they are more costly.


When we indicated to clients that financing of this type is more costly we point to clients that they have to balance any additional costs against what they are receiving. And what they are receiving quite often is simply the maximum working capital they need based on their asset and growth needs. That can rarely be achieved these days in the current challenging economic crunch - pandemic issues included.

THE EVERYDAY WORKING OF AN ASSET BASED CREDIT FACILITY

 So how do asset based loans work? A few simple key points will help you better understand how this type of financing might work for your firm on a day to day basis, and, as importantly, for long term growth.   The ‘key word’ here is ‘Asset’!  ABL financing focuses on the real true market value of your assets.

 Many other traditional types of financing, i.e. a bank line of operating credit, etc, is in fact focused on many other metrics such as the lender's perception of what industry you are in,  and typical financial ratios and metrics such as cash flow coverage analysis,  debt to worth ratios, etc, etc, etc!


Asset based lending puts those items aside. Using specialized industry experience, analysis, and in some cases appraisal of your assets you are provided with the maximum amount of capital those asset categories can achieve.

So, as an example, if you have  500,000.00 in account receivable you can borrow against that  $500,000.00. That typically is not how traditional financing works. We often point out quite frankly that asset based lending is in fact becoming a traditional financing method for Canadian businesses of all sizes.

WHO IS ' ASSET BASED ' ABL FOR ANYWAY?

So who is this type of financing for? The answer becomes very simple. It is for industries of all types in Canada – Typical transaction on the small side are $250,000.00 and deal sizes are in the multi-millions when it comes to large facilities. 

In some cases, sky is the limit and some of Canada’s largest corporations have adopted this financing method.  Asset-based lenders are specialists in understanding what your business is about, what are its cash needs and cyclicality, and what type of optimal structure works for your firm.

 HOW CAN MY FIRM ACCESS ASSET BASED LENDING ?   SPOILER ALERT - CONTACT '  7 PARK AVENUE FINANCIAL '

 How does your firm investigate asset-based lending on the Canadian business scene? Since the financing is rarely front-page mainstream news then it is highly recommended that you work with a trusted, credible and experienced advisor in this area. The Canadian landscape is cluttered with small firms, mega-corporations out of the U.S., as well as boutique divisions of other well-known institutions you know of but was not aware this type of financing was being offered to Canadian business.


So what’s out bottom line – its simply be informed, work with an expert, understand your cash needs on an immediate and long term basis, and consider structuring such a facility for your growth and benefit. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your asset-backed finance needs.


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

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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

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