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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
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.
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.Stan Prokop
