Canadian chartered banks, usually by virtue of their ‘relationship’ with business owners and entrepreneurs are in a position to pass on valuable financing tips and information on business loans and working capital for start up or smaller firms. Although the banks are a solid source of such information the banks themselves, by virtue of their charters and credit policies, are unable to directly satisfy the financing needs of the customer.
Business owners are often therefore encouraged by banks to ‘self finance ‘the venture via equity or owner capital and commitment. It is clearly a misconception that banks play a key and major role in the financing of new ventures. Possibly the only exception to this statement is the fact that the banks offer up, in their role as administrators, the Government Small Business Loan, which is a Canadian federal government program providing loans up to , in some cases 500,000.00$ for purchase of real estate, business assets, or leasehold improvements . (The more typical loan amount maximum is 350,000.00$)
We may or may not agree with Canadian banking policies on start up and young venture financing, we should however appreciate the banks stance – they are lending out our capital at very low rates, with potential to lose the entire investment if your firm can’t repay loans and financing.
How can the small or newer business succeed in financing options? Businesses of the size that we are discussing need thousands, literally millions of dollars of financing to fuel their growth in Canada. In our commentary that we are providing it is important to note that as companies develop along the ‘stage of development ‘timeline they of course have much more access to traditional bank and private equity financing. We are primarily talking about earlier stage companies, who may be still developing products and services and may not be yet profitable as they start delivering and billing for those products and services .
So what are the immediate challenges of firms that are unable to provide traditional financing and what are, more importantly, some immediate solutions?!
The challenges tend to be painfully obvious to the Canadian business owner or financial manager that has worked to get traditional bank and equity financing. They are as follows:
Perceived industry or product risk
No collateral
Uncertain financial projections
Limited Performance history
How can the Canadian business entrepreneur overcome these very traditional roadblocks and challenges? There are a number of ways.
First of all, all alternative methods of financing should be pursuing. Alternative financing methods are most non dependent on the above noted risks and challenges. Those alternative methods of financing might include:
*Business Angels or strategic partners (think suppliers!) for short term arrangements
*Equipment Lease financing
* Sale leasebacks on equipment already purchased and paid for
*Asset based lending arrangements that provide working capital facilities against initial receivables, inventory, and purchase orders (These facilities don’t have the same requirements as banks)
* Sr Ed Tax Credits – Customer who have filed claims can finance those claims for cash
* Invoice / Receivable Financing – Immediate cash for your firm’s receivables (these facilities can be of any size)
In summary, newer or smaller firms fall into the ‘ void ‘ area of financing, where very few traditional financing strategies can be implemented, at a time when cash flow and working capital are most critical .
Business owners should review non alternative strategies which can be of great assistance in early growth periods.
Our blog highlights Canadian Business Financing solutions via receivable finance , equipment finance, working capital financing, asset based lending, business acquisition financing,franchise finance, and tax credit monetization via SRED and Film Tax Credits. Our goal is to educate and assist Canadian businesses with their financing needs. You Are Looking For Canadian Business Financing! Welcome to 7 Park Avenue Financial Call Now ! - Direct Line - 416 319 5769
Monday, February 22, 2010
Thursday, February 18, 2010
Canadian Business Financing /Business Loans in the 2010 Economic Environment and Me
Despite a lot of pessimism out there many Canadian Business owners are still fairly optimistic about the business environment as we forge into 2010... Small business and middle market type firms in Canada clearly face the largest challenges for business financing – the larger firms; a la Financial Post 100 etc seem to be doing quite well, thank you.
The theme of last year can certainly be summed up in one word, and that’s survival. It clearly was a year of business and financing crisis and challenge for many firms. Business owners in the SME ( Small and Medium Enterprise ) market can clearly feel that if they made it through the 2008-2009 timeframe that they should be ok this year ; paraphrased I guess that means ‘ it cant get any worse ‘! What terrible economic times do for many businesses is to make them tougher, leaner and smarter.
A favorite expression of ours is that revenues and good times can mask a lot of flaws. When those revenues and profits and good times in previous years ended last year many firms saw real weakness in various financial and operational parts of their companies. That forced much business to adopt new strategies to address those financial and operational issues.
We have heard of the expression (I think it’s an old blues song?) that ‘I have been done so long everything looks up to me ‘! Most Canadian businesses are seeing sales grow again, some in fact significantly.
So is it all good news. Not really of course, a lot of the challenges are still there. Many a business owner can be forgiven, given what we went through in 2008-2009 for doubting their commitment and their skills in their business.
What continually amazes many readers is the fact that the SME engine is in fact the growth engine of the economy for business and employment. God knows they aren’t hiring at GM and Toyota we would think!
We keep reading about the entire stimulus that the federal government has put into the Canadian economy. I am assuming its there , but most business owners, like myself , certainly cant name one direct benefit of that stimulus , particularly in the area of business financing, business loans, operating lines of credit, etc.
While in fact the revenues and profits are starting to climb a bit lack of solid business financing is still a huge challenge for Canadian business owners. While the business owners and financial managers rely heavily on their ability to access financing naturally the challenges can sometimes be approached at the other end – i.e. operating more efficiently! Yet entrepreneurs being entrepreneurs, business owners should would like to market more, take on new product lines, and buy equipment to grow their business.
Cash flow is clearly one of the largest challenges for Canadian business. Financial reserves have dwindled, assets have been re mortgaged, and alternative financing has been sought. Most businesses, quite frankly, opted to reduce headcount and cut back expenses, thinking that a trip to the bank would not be successful.
Are Canadian businesses more optimistic this year, we think so? Are the challenges still there? We know so!
The theme of last year can certainly be summed up in one word, and that’s survival. It clearly was a year of business and financing crisis and challenge for many firms. Business owners in the SME ( Small and Medium Enterprise ) market can clearly feel that if they made it through the 2008-2009 timeframe that they should be ok this year ; paraphrased I guess that means ‘ it cant get any worse ‘! What terrible economic times do for many businesses is to make them tougher, leaner and smarter.
A favorite expression of ours is that revenues and good times can mask a lot of flaws. When those revenues and profits and good times in previous years ended last year many firms saw real weakness in various financial and operational parts of their companies. That forced much business to adopt new strategies to address those financial and operational issues.
We have heard of the expression (I think it’s an old blues song?) that ‘I have been done so long everything looks up to me ‘! Most Canadian businesses are seeing sales grow again, some in fact significantly.
So is it all good news. Not really of course, a lot of the challenges are still there. Many a business owner can be forgiven, given what we went through in 2008-2009 for doubting their commitment and their skills in their business.
What continually amazes many readers is the fact that the SME engine is in fact the growth engine of the economy for business and employment. God knows they aren’t hiring at GM and Toyota we would think!
We keep reading about the entire stimulus that the federal government has put into the Canadian economy. I am assuming its there , but most business owners, like myself , certainly cant name one direct benefit of that stimulus , particularly in the area of business financing, business loans, operating lines of credit, etc.
While in fact the revenues and profits are starting to climb a bit lack of solid business financing is still a huge challenge for Canadian business owners. While the business owners and financial managers rely heavily on their ability to access financing naturally the challenges can sometimes be approached at the other end – i.e. operating more efficiently! Yet entrepreneurs being entrepreneurs, business owners should would like to market more, take on new product lines, and buy equipment to grow their business.
Cash flow is clearly one of the largest challenges for Canadian business. Financial reserves have dwindled, assets have been re mortgaged, and alternative financing has been sought. Most businesses, quite frankly, opted to reduce headcount and cut back expenses, thinking that a trip to the bank would not be successful.
Are Canadian businesses more optimistic this year, we think so? Are the challenges still there? We know so!
Tuesday, February 16, 2010
The Big Squeeze - and Me
Front page of Globe and Mail today - Headline = ' SMALL COMPANIES / BIG SQUEEZE '
The article highlights the fact that the recession ended, but not the Small Business Credit Crunch !
The article, by Joanna Slater, talks about even ' the healthiest' of small firms not being able to get business financing .
The article has the usual info that we all know of course, that small and medium sized business is the employment engine of the economy - also highlights a new OBAMA fund of 30 Billion to help fund small business .
Naturally as the small and medium sized firms struggle to get a couple hundred thousand dollars
of credit line the Kraft Foods of the world are floating 9 Billion Dollar bond deals to buy their competitors . The big get .. bigger ..
The article is dead on in saying that as bank health is in the spotlight that small business feels it worst - One business owner is quoted in the article saying ' Based on what I have heard I haven't even bothered to go into a bank ' ..
Can we all agree Canada is in the same position - Lets let good small and medium sized firms in Canada get the financing they need !
Stan
The article highlights the fact that the recession ended, but not the Small Business Credit Crunch !
The article, by Joanna Slater, talks about even ' the healthiest' of small firms not being able to get business financing .
The article has the usual info that we all know of course, that small and medium sized business is the employment engine of the economy - also highlights a new OBAMA fund of 30 Billion to help fund small business .
Naturally as the small and medium sized firms struggle to get a couple hundred thousand dollars
of credit line the Kraft Foods of the world are floating 9 Billion Dollar bond deals to buy their competitors . The big get .. bigger ..
The article is dead on in saying that as bank health is in the spotlight that small business feels it worst - One business owner is quoted in the article saying ' Based on what I have heard I haven't even bothered to go into a bank ' ..
Can we all agree Canada is in the same position - Lets let good small and medium sized firms in Canada get the financing they need !
Stan
Tuesday, February 9, 2010
The More thing change , the more they stay the same, and me ..
Interesting article today on BNET.COM ; I wish I was creative in my titles - it was ' CIT/JOHN THAIN PLAN ESCAPE ' .
No its not a murder mystery, or a prison escape, but an update on CIT emerging from bankruptcy and hiring John Thain as CEO . Thain ran Bank OF America and was turfed over the Merrill Lynch fiasco .
It never surprises me as to how the cast of charachters never change, they just re-surface and start all over , tarnished reputations and all . We see it everywhere.
Stan
It never surprises me as to how the cast of charachters never change, they just re-surface and start all over , tarnished reputations and all . We see it everywhere.
Stan
Monday, February 8, 2010
Look, and Me..
Very interesting article today by Barry Critchley @ The National Post . It was on LOOK COMMUNICATIONS , and shareholder disapproval on management compensation.
The LOOK COMMUNCATIONS saga would make any spy novel boring - its really an incredible story of good, bad and ugly . I first worked with Look when they emerged in the 1990's , mid 1990's, and were owned by several Canadian Corporate heavyweights . They floundered a bit on technology, dot com impaled, and their corporate stakeholders abandoned them . They did a CCAA filing, re emerged and went public via some sort of RTO . Along the way there was a major cast of charachters, some very interesting people . I had a great relationship with their CFO / COO , who ultimately left and did a great job in stabilizing the company . In 2005 I founded my own financing firm, and Look was my first customer !!
Along the way I became a paying customer also . They did a customer mailer awhile back and said they were closing shop - Myself and many thousand others scrambled to get new satellite and internet at home .
The whole financial scenario seems very unbelievable - they close shop, have millions in the bank and assets for sale , etc .
Where it all ends I don't really know, but what a very uncomfortable story .
Stan
The LOOK COMMUNCATIONS saga would make any spy novel boring - its really an incredible story of good, bad and ugly . I first worked with Look when they emerged in the 1990's , mid 1990's, and were owned by several Canadian Corporate heavyweights . They floundered a bit on technology, dot com impaled, and their corporate stakeholders abandoned them . They did a CCAA filing, re emerged and went public via some sort of RTO . Along the way there was a major cast of charachters, some very interesting people . I had a great relationship with their CFO / COO , who ultimately left and did a great job in stabilizing the company . In 2005 I founded my own financing firm, and Look was my first customer !!
Along the way I became a paying customer also . They did a customer mailer awhile back and said they were closing shop - Myself and many thousand others scrambled to get new satellite and internet at home .
The whole financial scenario seems very unbelievable - they close shop, have millions in the bank and assets for sale , etc .
Where it all ends I don't really know, but what a very uncomfortable story .
Stan
Grants , & me
Interesting article today in the Financial Post by Brad Cherniak - Sapient Capital - Toronto
The article talks about business clusters - geographic focal points for business - he uses the example of Silicon Valley .
I worked in Kanata when for ten years in the 80's and it clearly was the first ' Cluster' area in Canada from my perpspective - Kitch/Waterloo seems a current incumbent .
The gist of the article is of government support and resources for these clusters .
I strongly disagree when Cherniak says the good new is that grant monies and resources are flowing to small business - working in the SME landscape everyday I certainly don't see that .
He is dead on though when referring to government intervention in the credit crunch as being somewhat undesirable - we should allow ' capital to flow freely where it wants ..' .
Anyway, I will let you know when Small and Medium business are getting all the capital they want - for health reasons don't hold your breath.
Stan
The article talks about business clusters - geographic focal points for business - he uses the example of Silicon Valley .
I worked in Kanata when for ten years in the 80's and it clearly was the first ' Cluster' area in Canada from my perpspective - Kitch/Waterloo seems a current incumbent .
The gist of the article is of government support and resources for these clusters .
I strongly disagree when Cherniak says the good new is that grant monies and resources are flowing to small business - working in the SME landscape everyday I certainly don't see that .
He is dead on though when referring to government intervention in the credit crunch as being somewhat undesirable - we should allow ' capital to flow freely where it wants ..' .
Anyway, I will let you know when Small and Medium business are getting all the capital they want - for health reasons don't hold your breath.
Stan
Tuesday, February 2, 2010
So What Else is New and Me - Nothing
A great short article today on BNET.COM - I have attached it below, bottom line summary is that the TARP funds in the states didn't stimulate Small Business Lending. I would point out that when the U.S. press talks about a Small Business that in Canada that's probably a pretty impressive business .
Did the same thing happen in Canada . I sure think so . The Federal Govt Secured Credit facility , viewed as a saviour of small business lending seems to have not completed one deal, the recession is over, and most lenders , if not all, are as cautious as ever . The mega bucks seems to have gone into ' infrastructure ', although I still count 20 potholes on the way to work . At the end of the day it will probably be small and medium business that takes us back to where we need to be.
Stan
->
Did the same thing happen in Canada . I sure think so . The Federal Govt Secured Credit facility , viewed as a saviour of small business lending seems to have not completed one deal, the recession is over, and most lenders , if not all, are as cautious as ever . The mega bucks seems to have gone into ' infrastructure ', although I still count 20 potholes on the way to work . At the end of the day it will probably be small and medium business that takes us back to where we need to be.
Stan
->
TARP Fails to Spur Small Business Lending
The good news coming out of the federal government’s latest assessment of TARP is that the financial system is alive, big banks are raising money and the final tab for the program might be less than initially estimated.
Not small potatoes. But the financial industry bailout is failing in two key respects: reigniting bank lending to U.S. consumers and businesses, and helping homeowners avoid foreclosure, concludes special inspector general Neil Barofsky in his office’s quarterly report to Congress. More broadly, he expressed concern that financial reform efforts are falling short:
Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.
TARP’s failure to stimulate bank lending to small businesses is particularly regrettable. In March 2009, the Treasury Department announced the “Unlocking Credit for Small Businesses” program and later earmarked up to $30 billion for small-business lending. As of Dec. 31, however, no funds had been disbursed under the program. Barofsky doesn’t explain why.
Yes, demand for credit by smaller companies is down. It’s also fair to ask whether community banks really need taxpayer money to boost lending for commercial customers. And there’s a risk in pumping funds into some businesses that, barring a sharp economic recovery, might go bust.
But now isn’t the time to reel in aid for such enterprises (and their lenders). Small Business Administration lending is finally showing an uptick, an encouraging sign. And as everyone knows, the key to reviving the economy is to create jobs. That means taking a chance on small businesses and small banks, just as the feds have taken a chance on big companies and big banks.
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