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BUSINESS FUNDING IN CANADA & BUSINESS FINANCING SOURCES
Business financing solutions in Canada clearly demonstrate that the types of loan and cash flow financing you need are clearly not equal in value and accessibility to business owners and financial managers. There are numerous types of business financing. Here's why, so let's dig in!
Any company borrowing for funds for business money will usually encounter some difficulty in taking on debt, and when there is an economic downturn, pandemics included! Whether it's financing startups or mature companies, those challenges to source business capital can be even more overwhelming.
In challenging times the ability to source debt capital is very challenging and time-consuming and the ability to work with an external business financing advisor is often recommended unless of course you and your own team are exceptionally qualified and have the management time to source capital.
Capital Funding will usually mean a combination of financing for day to day operations as well as long term finance needs. That final capital structure will be a combination of debt and equity, with lenders expecting a return on their capital and owners hoping to achieve a proper return on investment - ' ROI '.
Funding a business and acquiring assets for your business, whether that be equipment, buildings, rolling stock, and investments in technology - ie computers, software, etc typically should be acquired through proper debt instruments such as loans, leases, mortgages, etc. Matching the useful economic life of these assets to the proper finance solution is the goal! The amount of debt you take on to acquire these assets will force a dilution effect on the owners equity in the business - again pointing out the need for the right amount ... and type... of debt.
Banks and commercial funding companies in Canada are the two foremost sources of business capital and typically provide the basic financing needs you require to run... and grow the business. Financing costs are of course an expense and lower the overall pre-tax profit of your business - no secret there.
Business owners and financial managers should always be testing the cost of their debt in order to allow the company to move forward with the right goals around its costs of borrowing and return to shareholders/owners.
Many industries are very 'capital intensive ' and require a much larger amount of capital as compared to service industries, so depending on your industry, as well as what ' stage of growth ' your company is in will be the key drivers around types of short term and long term finance.
The ability to diversify your finance solutions is often recommended by experts; that might be at the start-up stage or in times of high growth. When business challenges occur that diversification allows you to consider ALTERNATIVE SOURCES OF FINANCING. In recent years many new finance solutions in alternative financing compete aggressively with traditional financing via Canadian chartered banks. It is safe to say that any type of financing, either traditional or alternative has different benefits and disadvantages that must be weighted by owners.
What Are The Best Financing Options For A Business
Many different types of business finance solutions exist - the challenge revolves around your ability to ensure you're pursuing the right type of loan or cash flow financing solution.
At 7 Park Avenue Financial many firms we work with are in the ' startup funding ' stage; new business funding for owners who have committed some of their personal capital and are looking for additional financing to start/bootstrap the business. Entrepreneurs consider every source of capital, even tapping that ' friends and family ' and ' Angel ' investors. Some consider the venture capital route which is very time consuming and expensive and typically not appropriate for the majority of startups. Those ' VC ' type deals seem most common in the technology/software area/biotech area. Often a large amount of equity must be given up by founders to receive substantial financing.
Occasionally government grants and government VC capital might be available. Companies going the VC route will have considerable pressure to quickly get to a hyper-growth stage allowing investors to recoup their investment via some sort of exit strategy.
One other source of business capital for more traditional businesses, including franchises, is the Government of Canada Small Business Loan program, providing up to $ 1,000,000 of debt for three specific categories of assets: Equipment, Leaseholds, and Real Estate.
Many business owners/entrepreneurs aren't familiar with the Canadian govt small business loan program. We can call it the ' bread and butter ' in terms of the phrase ' government loans'. Clarification is required here because it's not the gov't that actually funds the loans, it's Canadian banks with the loan guarantee in place from the federal gov't.
For Canadian business owners, timing is pretty well ... everything! That’s why with careful preparation of your submission a loan can be approved in a matter of days
Getting back to our theme of ' timing is everything ' an even more accessible solution for owners/mgrs is the working capital term loan. Often provided on an ' unsecured ' basis these loans are based primarily on the cash flow within your business bank account. There is a lot less paperwork required and funding can occur within days.
Many businesses, particularly in the SME sector (small to medium enterprise) require purchase order funding solutions when they receive orders and contracts far in excess of their normal financing capabilities. P O Financing allows companies to access new markets and larger customers, enhancing revenue growth.
Most times even international orders of almost any magnitude can be financed if your firm has a qualified buyer and a legitimate supplier. Because of that most firms also require a business credit line, in some cases called an ' ABL ' line. These revolving facilities are provided by traditional financiers such as banks, and, somewhat unknown to most, commercial finance companies often referred to as 'asset-based lenders '.
What information is required in order to assess your firm’s qualifications under most types of financing? It's not as complex as it might seem. Traditional applications often include just financial statements, but can also be augmented by a business plan or cash flow forecast. Canadian banks are typically the first ' go to ' for many business owners, and a lot of time can be spent on finding a bank, and banker, that can meet your specific needs.
Borrowers find out very quickly that banks are looking for well-performing firms that have sales, assets, clean balance sheets, and profits. Those attributes, combined with a solid BUSINESS PLAN and cash flow projection will typically lead to financing success with a bank. Canada's crown corporation non-bricks and mortar bank for entrepreneurs will also provide solid financing solutions.
In certain cases your firm might be a solid candidate for cash flow loans, often called 'mezzanine finance; with the loan secured solely by those predictable cash flows you must be able to demonstrate. These loans are often viewed as the interim bridge between debt and equity.
Both working capital term loans, as well as short term cash flow loans, are very popular in current times. Any company showing good growth is a candidate for a cash flow loan either traditional in nature, or of the type offered by a multitude of short term working capital lenders. The latter type of loan is typically a one year loan and is based on a simple formula of 15-20% of your annual sales. With these loans rates are higher as lenders are looking for higher rates of return given the loans are not collateralized.
In all cases you should be prepared to demonstrate the type of collateral that requires financing (which might include just your sales), mgmt experience, and a solid understanding of how business loans or cash flow facilities will be repaid or revolve.
We have demonstrated there are numerous sources of funding for businesses. Careful time and consideration must be given to the type of financing your business needs - different costs and risks are associated with every type of financing.
So yes, it’s true, not all business financing solutions are equal when it comes to benefits or qualifications. Seek out speak to a trusted, credible and experienced Canadian business financing advisor to determine your exact needs and potential solutions.
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.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2020
