Demystifying Business Credit Lines: Unlock the Full Potential of Your Company's Finances

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YOUR COMPANY IS LOOKING FOR A BUSINESS CREDIT LINE!

CHOICES IN BUSINESS LINES OF CREDIT

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

Financing & Cash flow are the  biggest issues facing businesses 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

Phone = 416 319 5769

 

Fuel Your Business Ambitions: How a Line of Credit Can Transform Your Company

 

The Business credit line in Canada.  Most clients we initially meet tend to say 'What are our chances ' when in fact we maintain they should be asking 'What are our choices ‘!   Let's dig in.

 

INTRODUCTION

 

Business lines of credit are a critical financial tool for a business - providing flexible access to cash when funds are needed - allowing a company to manage cash flow and cover short-term day-to-day expenses as well as allowing a company to assess growth opportunities. It's important to understand the advantages of business credit lines and how they are different from other forms of financing such as term loan structures, as well as the types of business lines of credit, their advantages and disadvantages, and how they differ from traditional business term loans.

 

 

WHAT ARE THE TYPES OF BUSINESS LINES OF CREDIT  

 

There are two types of credit lines -  Secured lines of credit and Unsecured business credit lines

 

Secured Business Line of Credit - The secured business credit line requires collateral, typically specific assets in the business such as accounts receivable, and inventory - Asset-based lenders combine fixed assets to further increase the size of the credit line. Business lenders take this collateral as security for the revolving line of credit facility.

 

Unsecured Business Line of Credit -  The unsecured business credit line is typically offered by a bank as opposed to a non-bank asset-based lender- Banks take a general lien on the business as a whole, typically by a loan document known as a GSA/General Security Agreement. It does not specify specific assets but places an overall blanket lien on the business- Personal guarantees are also required in this type of facility, and businesses applying for unsecured business lines should be able to demonstrate good personal credit history of the owners as well as healthy financial statements. Interest rates on unsecured credit lines are typically very attractive and are often the lowest cost of borrowing.

 

 

HOW TO UTILIZE THE BUSINESS LINE OF CREDIT  

 

There are numerous ideal Scenarios for Utilizing a Business Line of Credit - They include:

 

Addressing seasonal or cyclical cash flow gaps in a business or industry

Financing sales growth via new sales of  marketing campaigns required additional short-term

overhead expenses

Seasonal Businesses Seasonal businesses can use a line of credit to cover overhead expenses

during the off-season or bridge cash flow gaps between seasons

Covering unexpected short-term expenses as a safety net in cash flow management, ability to meet

payrolls, etc

Growth - Businesses can focus on growth opportunities around new products or services or markets

without making a long-term capital commitment

 

 

WHAT ASSETS ARE FINANCED IN A CREDIT LINE 

 

The essence of what we're talking about is the type of borrowing in a business loan that's associated with the monetization of assets via a line of credit for a small business. That's current assets by the way, which typically are essentially your A/R and inventory. We'll also discuss monetizing equipment and even real estate in this facility! Access to revolving credit facilities is a valuable tool for any business, large or small.

 

 

REVOLVING CREDIT FACILITIES ARE SHORT-TERM IN NATURE 

 

Business credit lines should be focused on short-term borrowing. Longer terms are associated with term loans for equipment, mortgages on the business property, etc. Naturally, while a term loan expires when you make that final payment business credit facilities are there and available to your firm based on your ongoing level of receivables and inventory.

 

TERM LOANS ARE FOR LONG-TERM ASSETS

 

You will of course want to match the amortization of the term loan with the useful life of the asset. Let's use computers as an example - A typical lease term might be 3 years, and you would want to retire the lease or loan by that time as it is typically time to upgrade technology. But we digress..!

 

 

ASSESSING THE 2 CHOICES IN A BUSINESS LINE OF CREDIT? 

 

And what about those ' CHOICES ' we talked about? It comes down to essentially two solutions for the business revolving line of credit:

 

1. The Canadian chartered bank solution

 

2. The non-bank asset-based business credit line - it’s typically called an ' ABL ' by the industry

 

  

WHY THE RISE OF NON-BANK FINANCING  

 

Years ago any non-bank financing was viewed as an ' alternative ‘, in some cases, there was a perception it was the financing of last resort. Absolutely not the case today as the world of business credit changed dramatically, more so after the 2008 worldwide recession, where many firms, including banks, went under.  That new form of financing, the ABL business credit line all of a sudden seems available and cost-effective in most cases.

 

KEY ASPECTS  OF THE BANK CREDIT FACILITY

 

Bank business credit agreements or those of business credit unions for large companies as well as small businesses tend to be what is known as ' covenant based '. Even if the business owner and financial managers consider the company to be in growth mode it might in many cases not be able to meet some basic debt to equity and cash flow rations that are required by Canadian chartered banks in the terms and conditions of their loan agreements.

 

THE KEY DIFFERENCE BETWEEN BANK CREDIT LINES AND ASSET-BASED LENDING FACILITIES

 

Bank credit lines typically margin just A/R and receivables, and facilities are at a fixed or variable rate benchmarked against the current prime rate.

In the case of an Asset-based business credit facility the borrowing allows you to borrow the market value of the lump sum of all your assets - so that might be a/r, inventory, tax credits, and equipment.

Any unpledged asset becomes financeable. While there is typically a ' credit limit ' in bank facilities ABL lines are more flexible and can increase as your sales and assets grow, pretty well automatically. The ability to get approved for an ABL loan also is typically a much shorter time cycle than more traditional financing through the application process.

 

  

IS THERE A DISADVANTAGE TO NON-BANK OPERATING LINES OF CREDIT?  

 

Recently we were at a client and the CEO asked a very basic question -  ' What then is the downside of ABL ‘.  The answer? Other than a typically higher cost such as the interest  rate on the facility  the benefits are:

No outside collateral required

Higher borrowing power,

Unlimited growth - it’s not a capped credit line per se. While the credit history of your business is important, the focus nevertheless is on ... Business assets & sales!

 

If we had to state one ' downside ' it might be the fact that you are required to report more regularly on your asset lists. In many cases that made most of our clients better managers of their business.

 

Having a good credit line in place allows companies to avoid higher cost interest charges for short-term working capital loans, merchant advances, business credit cards, etc - Those latter 3 work but are not optimal for day-to-day funding of your operations and also demand a focus on the credit score/credit rating of the business owner/owners.

 

The business owner must balance the cost of capital versus access to sorely needed capital to run and grow the business. Important to know is the fact that of course you only pay interest on the amount of the facility you are using, as that amount will fluctuate depending on the inflows and outflows of cash in your business - every company has a different operating cycle.

 

Bank business credit is always going to be low-cost and flexible if your firm meets traditional criteria. When it doesn’t the business owner should know that he or she has another choice, the ABL line. And by the way, many clients often try ABL for a year or so and then are faced with the decision that they are eligible to be ' bankable ' in the traditional sense.

 

 

WHAT IS THE DIFFERENCE BETWEEN A LINE OF CREDIT VS.  A TERM LOAN 

 

Term loans and lines of credit are 2 different types of financing - for term loans banks and commercial finance companies and asset-based lenders focus on the current financial health of the business - term loans provide a fixed lump sum installment of capital with periodic payments structured as repayment of the loan

Business credit lines are revolving facilities that allow companies to draw funds as they need them and they pay interest only on the funds that are used under the facility - That is why credit lines are suited to general working capital and cash flow needs giving business flexibility of when to borrow for specific purchases.

 

  

  

CONCLUSION - REVOLUTIONIZE YOUR BUSINESS CASH FLOW WITH THE POWER OF A BUSINESS LINE OF CREDIT     

 

Business credit line facilities give a business the flexibility to manage cash flow needs and fund day-to-day operations - Business owners must assess what type of credit facility meets their specific needs that will allow the company the financial flexibility it needs in different market conditions in today's competitive landscape.

 

Bottom line. You have a choice in your business credit needs. Call  7 Park Avenue Financial,  a trusted, credible, experienced Canadian business financing advisor with a credible track record who can help you facilitate the business credit line you need.

 

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

 What is a business credit line? 

A small business line of credit is a flexible business financing option that provides established businesses with access to a predetermined amount of capital under a credit limit,  the facility is used by the business as needed for various short-term financial needs. Unlike term loans, lines of credit allow businesses to borrow, repay, and borrow again (similar to a business credit card ) under the revolving nature of the credit lines, up to the approved credit limit. The company does not have to continually reapply for business credit under this type of financing tool. An unsecured line is often offered by banks to established businesses. A monthly or annual fee may apply to a credit facility.

 How long do you need to be in business to get a line of credit? 

The length of time a business needs to be in operation to qualify for a line of credit varies depending on the individual lender and the requirements around the size of the facility. Typically businesses that have been operating for at least two years are eligible for a bank or credit union facility, as it demonstrates stability and a track record of business success. However, some lenders such as asset-based lenders may offer lines of credit to newer businesses, depending on their financial performance and other factors around collateral and guarantees.

 Is personal credit checked for a business line of credit? 

Yes, personal credit is often checked when applying for a business line of credit. Many lenders consider the personal credit score of the business owner or primary applicant as an indicator of creditworthiness and financial responsibility. While having a strong business credit profile is essential, a good personal credit score can also help increase the chances of being approved for a line of credit and secure better terms. Asset-based lenders place less emphasis if any at all on personal credit history, but banks place a high level of emphasis on the credit history and net worth of the business owner in assessing a higher credit limit. Online lenders offering credit facilities also focus on the business owner's credit score.

 

 Does a business line of credit affect credit score? 

A business line of credit can affect both personal and business credit scores, depending on how the credit line is managed and the nature of the personal guarantee. If the business makes timely payments and maintains reasonable balances that fluctuate in the facility,  relative to the credit limit, it has a positive impact on credit scores. Late payments, high balances, or defaults can negatively affect credit scores. It is essential for businesses to build business credit responsibly to maintain a strong business credit profile. The minimum credit score required by most institutions is 650.

 

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

Revolutionize Your Business with Alternative Finance Business Loans / Alternative Finance Business Loans: Breaking the Barrier to Business Financing

 

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YOUR COMPANY IS LOOKING FOR  BUSINESS LOAN  SOLUTIONS!

Innovative Funding Solutions: How Alternative Finance Business Loans are Changing the Game

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

Financing & Cash flow are the  biggest issues facing businesses 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

 

The Rise of Alternative Finance Business Loans: How to Capitalize on this Growing Trend

 

Business loan success, whether it's bank loans or alternative finance often has owners/managers wondering if they've got what it takes.

 

 

INTRODUCTION

 

Small and medium sizes business owners know they are the backbone of the Canadian economy. But financing their businesses with traditional bank loans can be a major challenge, if not impossible. Alternative lending options can provide that access to business capital on terms that often can be more flexible than bank loan financing. Let's take a look a the type of financing available and which type of alternative lending solution might be suitable for your business.

 

We're going to try and eliminate the word ' painstaking' from your challenges around funding your company in the SME COMMERCIAL FINANCE marketplace. Let's dig in.

 

 

WHAT IS ALTERNATIVE LENDING? 

 

Alternative lending is a type of business financing that provides access to capital outside of traditional banks, most notably bank financing. Various types of  Canadian business financing solutions are available under the 'alternative lending ' umbrella - from term loans to business credit lines, as well as numerous other specialized niche financing solutions that are cash flow and debt finance based.

 

Demand for alternative financing is increasing among early-stage firms and smaller businesses that are growing - Many tech companies in the ' fintech ' business landscape benefit from these alternative lending services versus traditional financing, with a new level of funding confidence to borrowers.

 

 

Alternative business lenders provide quick access to capital and are flexible in nature - often custom-tailored to a company's unique situation.

 

Business funding needs arise out of a number of requirements for any owner/mgr who is focused on growing the company's sales. Typically those needs come from the desire to expand, introduce new products or take on new contracts, or even acquire a competitor.

 

 

  

HOW DOES ALTERNATIVE BUSINESS LENDING WOR  K?

 

Understanding how alternative business lending works is all about the type of loan and business financing you are looking for - As in any type of business finance, your firm must be able to demonstrate repayment. Alternative lenders offer more flexible and less restrictive qualification criteria around the numerous financing solutions available.

 

The main benefit business owners see in alternative finance funding is faster approval than more traditional financial institutions such as banks - Amortizations vary by type of loan, but it can be stated that alternative loans are typically more short-term in nature - Whether it is asset-based financing or a cash flow financing payments are structured around the unique business model and industry of the borrower.

 

Interest rates in alternative finance are more competitive than even, in some cases they are competitive and lower than bank financing but on balance, alternative financing costs more but provides access to capital.

 

 

Are Alternative Finance Business Loans the Key to Your Company's Success? 

 

 

Financing your business can come from traditional (typically ' bank ') or nontraditional finance sources. Suffice it to say alternative finance has been very much on the rise since the great recession of 2008-9 and the Covid pandemic of recent times!

 

Each category of loan has different requirements that will help guarantee financing success- therefore our question is - Have you got what it takes?

 

Small and medium-sized firms, whether you like it or not have both traditional and alternative lenders looking at owner finances and credit history. While many newer forms of alternate finance (asset-based business credit lines, a/r financing, sr&ed tax credit financing, etc)  place much less emphasis, and in some cases almost no emphasis on the personal credit of owners suffice to say a higher personal credit score is better!

 

The absolute fundamentals of any business loan revolve around your ability to provide, or at least ' talk to ' a business plan and cash flow and revenue forecast. These are very basic requirements - they are not rocket science. Also, this is not a good time to be a dreamer - realistic projections win.

 

GOVERNMENT LOANS

 

In some cases, all the financing you might need will be ' collateral ' based. Hopefully that’s business collateral and not personal assets! As an example the GOVERNMENT GUARANTEED SMALL BUSINESS LOAN requires no personal assets to be pledged, and actually finances leasehold improvements as well as fixed asset/equipment needs.

 

Recent changes in 2022 to this federal government loan program included a new cap on financing being increased to 1.1 Million, as well as numerous other finance categories being available under the loan program such as lines of credit, working capital, intellectual property, franchise fees, etc! Government small business loans come with attractive interest rates and limited personal guarantees, unlike a traditional bank loan which requires a full guarantee and potential external collateral.

 

Also, many EQUIPMENT LEASING firms are able to finance your asset and equipt. needs without outside collateral or a focus on personal owner credit.

 

 BANK LOANS 

 

Finding a great commercial business banker (notice we said banker, not bank) is worth its weight in gold. Given that Canadian banks are the closest thing to an oligopoly (think monopoly) loan requirements rarely differ at banks. Your banking success will deliver loan rates and unlimited access to capital if... and it is a clear "if"... you have:

 

Owner personal credit

Business commercial credit history

Assets

Cash Flow

Mgmt Depth

 

 

TYPES OF ALTERNATIVE BUSINESS LENDING

 

As we have said each business financing category has some absolute basic requirements. Some of the basics in the alternative finance category? They include:

 

Term loans - These loans tend to be short-term working capital loans/ merchant cash advances with simple qualification criteria based on a formula of sales and the owner's personal credit history. Repayment tends to be over a 1-year period and financing is quickly accessible, even from an alternative lender such as fintech online lenders, but financing costs are high for small businesses.

 

A/R Financing/ invoice factoring  -   Any business with growing sales can benefit from receivable financing - Financing is based on the size and quality of your receivables  and factoring facilities allow a business to receive funds as the business generates sales for its products and services - Financing charges are based on a small percentage of the invoice amount, and the  requirement to show aged receivables of reasonable credit quality  must be met - Invoice financing is probably the most popular type of alternative finance used by Canadian businesses

 

Inventory Finance - A marketable inventory of goods that can readily be priced and sold as the fundamental collateral of an inventory loan

 

Non-Bank Asset Based Lines Of Credit - receivables, inventory, and fixed assets are combined into one borrowing facility that can be used on an ongoing basis - Funds are drawn as needed and the business pays for only the amount of facility used in these alternative business loans that mirror bank lines of credit

 

Sr&ed Tax Credit Financing - the ability to produce a credible SR&ED claim with appropriate documentation - Any Canadian business that conducts r&d is probably entitled to receive refundable tax credits under Canada's Scientific Research and Experimental Development (SR&ED) Tax Credits. While most companies are eligible for these credits, it can take months before claims are approved- Companies can access sr&ed  tax credit loans, allowing companies to receive immediate access to their accrued investment tax credit refund.  SR&ED financing benefits the company and helps Canadian companies focus on R&D and advances innovation in Canada.

 

EQUIPMENT LEASE FINANCING - Businesses requiring new assets and technology to increase new equipment to increase production can benefit from equipment lease financing. Businesses can finance new and used equipment and lease financing is a solid cash flow management tool that conserves existing credit lines and helps match cash flows against the life of the asset being financed.

 

Bridge Loans/Sale Leasebacks - equipment or real estate assets that have been appraised or valued to mutual agreement between business owner and the lender

 

  

CONCLUSION - UNLOCKING THE POWER OF ALTERNATIVE FINANCE BUSINESS LOANS FOR CANADIAN BUSINESS  

 

Most SME businesses in Canada will eventually face the challenge of accessing capital - while Canadian banks are the primary ' go to ' the inability of the banks to fund many businesses because of their borrowing guidelines ultimately hinders the growth of many businesses, Startups have an even bigger challenge - Canadian business is turning to alternative lenders to access the funding they need for their growing businesses.

 

Still not feeling like going it alone? In many cases, your firm has the ability to improve both improve or make more attractive your loan success by working with 7 Park Avenue Financial,  a trusted, credible, and experienced Canadian business financing advisor who can assist you with your business loan, banking needs, and alternative solutions for small business owners and growing businesses who can't access traditional loans.

 

  

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

 

  

 What are the pros and  Cons of Alternative Business Lending   

 

Alternative financing is easier to qualify for and funding approval is quicker than banks and business credit unions. Application criteria are generally less strict so companies looking for financing can address cash flow issues with various types of cash flow and debt financing solutions in alternative lending.

The downside to alternative financing via an alternative business loan is the higher cost of borrowing given repayment periods are typically shorter- In some cases, additional collateral and personal guarantees may be required.

 

 

What is BDC’s Working Capital Financing 

 

BDC / Business Development Bank is a government crown corporation, a non-bricks and mortar bank, unlike traditional lenders,  that provides business financing to entrepreneurs. BDC’s working capital financing solutions allow businesses to finance growth projects and launch new business initiatives, BDC is a complementary lender and its financing solutions complement existing business lines of credit.

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

ALTERNATIVE BUSINESS FUNDING IN CANADA

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You Are Looking For Business Funding Choices! 

Redefining Business Financing: The Rise of Alternative Funding Solutions

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

        Financing & Cash flow are the  biggest issues facing businesses today 

               Unaware / Dissatisfied with your financing options?

Call Now!  - Direct Line  - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

Email  - sprokop@7parkavenuefinancial.com

 

 

  

Alternative Business Funding: The Game Changer for Small Business Success  

 

 

Alternative business funding allows many smaller firms to.. get big!

 

For both sales growth and growing profit margins, it's essential to have the proper business financing in place - most business owners and financial managers recognize that.

 

 

INTRODUCTION  

 

Today's fast-paced business landscape is more competitive than ever -  Business funding solutions have become critical- But when traditional bank loan type financing is not able to be accessed for a variety of reasons around strict requirements and long application times what does the business owner do?

 

At 7 Park Avenue  Financial, we have got an answer - alternative financing!  It bridges the gap and can provide your company with financing that is flexible, and more importantly accessible!    These solutions provide a business with business capital to grow and thrive - It's important to understand which of these financing options is best suited for your firm. Let's dig in.

Is the bank the only option? Categorically no, although most business owners for whatever reason view the bank as the only solution - only to be rejected for a variety of reasons, one of which is actually ' size ' believe it or not. While our Canadian chartered banks do a great job in financing large firms, they have numerous criteria in place that your firm might not be able to meet.

 

WHAT IS ALTERNATIVE FINANCING? 

 

 

Alternative financing from alternative business lenders is any method of business financing which allows a business to acquire capital outside of traditional banks and other more traditional financial institutions. These non-bank commercial financing companies and asset-based lenders offer different funding options and alternative loans based on a company's qualifications and needs.

 

The business chooses alternative finance solutions as credit requirements are lower and funding is easier to qualify for - Additionally, a faster approval process compared to bank approvals provides funding around business expenses, growth and the need for ongoing cash flow.

 

  

Break Free from Traditional Loans: Unleash the Power of Alternative Business Funding & Financing Benefits 

Banks often focus significantly, especially in the SME sector ( small and medium enterprises), on the business owner's and principals' personal credit history. They look for solid and high credit bureau scores, and low scores can impact your firm's ability to get a loan.

 

In some cases, banks might even determine an entire industry; for example, oil, autos etc., may for a time be... ' out of favour.' Canadian business history has plenty of examples of that. Occasionally banks might deem that a major customer of your firm actually creates a 'concentration ' risk.

Alternative funding sources allow business owners to position the business as the major reason to achieve credit approval. Business funding alternatives become more accessible in alternative finance because it's the business under the microscope, not so much the owners.

In today's environment, business capital for cannabis firms is in high demand. Banks have been reluctant to address all facets of cannabis financing, although this has ' slowly,' and we do mean ' slowly ' changing.  Alternative funding sources, via non-bank commercial finance companies, provide finance solutions.

Cash flow is a major factor in assessing business loan potential. Business owners and their financial managers should be positioned to address the ins and outs of cash flow, i.e. sales growth, seasonality, collections, payables, etc. Many alternative funding solutions allow you to grow revenues when traditional bank financing is not available.

 

ALTERNATIVE BUSINESS FUNDING SOLUTIONS IN CANADA

Solutions for More Business Capital Via Alternative Business Funding Companies

Non-bank receivable financing / Invoice Factoring -  Invoice financing via factoring is a business financing solution that allows companies to sell/finance to sell their outstanding invoices to a third-party commercial finance company / factoring company at a discounted rate in exchange for immediate cash. This method of financing is valuable for businesses that experience long payment terms and collection challenges from their customers based on payment terms or the need to improve their cash flow.

Advantages include improved cash flow management and the ability to run and grow the business without the constant need to ' chase customer payments' - Companies using factoring solutions from alternative lenders such as Confidential receivable financing should have good sales and profit margins.

 

Inventory Financing

Purchase Order Finance

Non-bank asset-based business credit lines - non-bank business lines of credit provide a flexible revolving credit facility to businesses that can draw down on capital when they need it without term loan-type obligations. These credit lines are custom-tailored and flexible and combine the company assets such as accounts receivable, inventories, and fixed assets as well as company owner commercial real estate into one single borrowing facility - Interest rates are higher than bank financing but eligible requirements and the lack of covenants is making this business finance solution more popular.

 

Tax Credit Financing - SR&ED Tax credit financing helps to finance research and development under Canada's sr&ed program

Lease Financing  & Sale-leaseback of assets - Equipment financing and sale-leaseback solutions allow for the financing and purchase of new assets and technology required by the business - An excellent option for capital-intensive businesses.

 

Short-Term Working Capital Loans  / Merchant Cash Advances  -  the merchant cash advance /short-term loan funding solution is an easily accessible working capital solution that is based on a formula or sales and owner personal credit history. Funds can be secured very quickly and flexible payment terms around cash inflows are offered via online lenders - these loans are higher cost.

 

 

HOW DO YOU CHOOSE THE RIGHT ALTERNATIVE FUNDING SOLUTION FOR YOUR BUSINESS  

 

Choosing the right  alternative funding solution for your business should be based on your cash needs, and the overall financial situation and growth challenge - Factors to consider include -

 

1. Eligibility: Determine which business financing  options are available to your business based on your business credit score quality and financial strength, as well as the particular needs of your business model and industry

2. Financing  amount required: Assessing  the amount of capital your business needs and ensuring the maximum financing requires is available via any 1oneor combined solution

3. Cost: Consider  financing costs, interest rates, fees, and repayment flexibility offered via any funding solution that meets your repayment ability 

4. Speed: Evaluate how quickly  funds are needed  vis a vis timeline required to properly complete the funding process

5. Flexibility:  Compare structured term loan type solutions to more flexible solutions such as a/r financing.
   
   We think you get the picture, and you don't necessarily have to take on ' debt ' to address capital and cash flow needs, as many of our above-noted solutions monetize assets or sales.
   
   Be prepared when approaching an alternative business funder - financials, a  business plan, and info on current lenders are a great start.

  

 

 CONCLUSION - ALTERNATIVE BUSINESS FUNDING - THE GAME CHANGER FOR BUSINESS SUCCESS

 

  

When traditional bank loans become increasingly challenging the small business owner can look to alternative financing for financial support. Companies find the perfect solution that is custom-tailored and suited to business needs and long-term goals - allowing a business to prosper and consider growing.

Bottom line? Your business has lots of funding options, traditional and alternative. Seek out a speak to trusted, credible and experienced Canadian business financing advisor with a  track record of success in alternative funding sources for small business.

 

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

What is the most popular type of alternative loan?  The most popular type of alternative loan is a term loan. Term loans are lump sum installment business loans repaid over a period of time - typically 1-5 years, These loans tend to fund specific projects such as asset acquisition, or expansion. Both traditional lenders and alternative business financing lenders/funders provide this type of loan.    What is the difference between traditional and alternative financing?  Traditional financing typically involves borrowing money from a bank or other more traditional financial institution, such as a business-oriented credit union. Commercial borrowers must have strong financial statements, and collateral, and be able and willing to provide a personal guarantee. Alternative business loans and finance solutions come from commercial financing companies and asset-based lenders who are non-bank in nature. Alternative finance business funding tends to be more accessible for the business borrower.   How do startups get business funding? Startups obtain funding for small business loans from various sources, including traditional financing, banks, or equity-oriented business capital via venture capitalists, and angel investors. Solutions for alternative funding for startups from a government-guaranteed small business loan from a bank or credit union as well as grants are also available - Many communities offer start-up accelerators and incubators offering different types of infrastructure support for start-ups and small businesses.

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

Confused About Canadian Working Capital Finance? Cash Flow Financing Techniques That Work

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Mastering Working Capital Finance: Financing Cash Flow Solutions

        Financing & Cash flow are the biggest issues facing businesses today

               Unaware / Dissatisfied with your financing options?

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Boost Your Business's Cash Flow with Smart Working Capital Finance Tactics

 

Clear answers... no, even better, clear real-world solutions. That’s what Canadian business is looking for in working capital finance. And that type of financing and cash flow solution has been tough to come by over the last several years.

 

 

INTRODUCTION 

 

Working capital finance solutions are necessary for the money a business needs to fund day-to-day operations. It typically covers business expenses such as wages, rents, inventory purchases, and variable expenses. 

 

Small and large companies need effective working capital finance

 

Let's dig in on key issues the business owner needs to know -

What is working capital finance and what is it made up of

What are  financing options from traditional financial institutions such as banks

What alternative finance options are available for companies not able to access traditional financing

What is effective working capital management and what best practices should a business use

How can a business choose the right financing options based on cash flow forecast business needs

 

  

  

WHAT IS THE DIFFERENCE BETWEEN CASH FLOW AND WORKING CAPITAL?   

 

 

Cash flow is in effect a summary of the cash holdings of the business and indicates the inflows and outflows of cash over time - Companies with good income and profit with good asset turnover will have positive cash flow.  The  ' cash flow statement ' that is part of a business financial statement will show how much cash was used during the year and will reflect overall liquidity. Operating cash flow and cash flow from financing activities are also key parts of those financial statements.

 

Working capital is a measurement of the relationship of the difference between current assets and current liabilities on the balance sheet  - It can be positive and a company can also have negative working capital  - If the current assets of the business are higher than the current liabilities working capital is positive.

 

 

WHAT ARE THE COMPONENTS OF WORKING CAPTIAL? 

 

 

Let’s examine why your understanding of working capital and your ability to measure the need and the solution is as critical as ever in the competitive environment you fight every day.

 

Current assets on balance sheets are those assets convertible into cash within a year - Most common assets include accounts receivable and inventory. Current liabilities such as accounts payable are obligations the company has that are payable within the current year. 

 

Payables, Receivables and Inventory are the main components of the working capital.

 

  

Efficient Cash Flow Management Via Working Capital Finance  

 

Let's focus on some of the hard facts first. If you don’t have working capital key issues such as payrolls, loan and lease payments, inventory purchases, etc. can become big issues pretty quickly!

 

So how can you change assets and sales into the financing of cash flow? It's a one-word answer - monetization! You need to use a razor-sharp focus on monetizing (i.e. changing!) receivables, inventory, and sales into working capital to address those key issues we just mentioned above.

 

The better you do this you will find the better the patient's health will be and that patient is of course your company.

 

Canadian business owners and financial managers know that their balance sheets and income statement are related. Today we're focusing mostly on the balance sheet - The amount and relationships between those current assets such as accounts receivables, inventory, and payables can let you zero in real quickly on what some of the problems might be. (We won't forget to tell you about those solutions also!).

 

Working Capital  Mastery: The  Solution for Financing Cash Flow

 

Yes, you do need positive working capital to 'stay healthy' from a working capital and cash flow perspective.  And talk about a balancing act, if you are growing too quickly your investment in A/R and inventory hinders cash flow, and if sales are shrinking then your receivables shrinks also.

 

So, we've done the usual pretty good job (we think) of telling you what your problems are. But that’s not why you came here, right? Let’s address solutions.

 

Are there in fact real solutions that allow you to fix today’s financing of cash flow challenges, and at the same time address these issues in a long-term manner? Here's the good news. There are!

 

 

TRADITIONAL FINANCE OPTIONS 

 

Traditional financing options for working capital include:

Bank loans,

Business lines of credit

Business credit cards

Bank loans are typically long-term in nature with longer amortizations and they are repaid over a period of years. Lines of credit are short-term financing solutions that are used to cover short-term cash flow needs. Credit cards are another option for financing cash flow, but they typically come with high-interest rates and are often used for incidental emergency purchases.

 

 ALTERNATIVE FINANCING OPTIONS 

Alternative financing options for funding cash flow include:

 

Invoice financing / Factoring

Supply chain finance

Asset-based non-bank line of credit

SR&ED tax credit financing

Purchase Order Financing

Sale leasebacks

Short Term working capital loans/merchant cash advances

 

Almost all of these solutions are non-bank independent finance company solutions! We bet you did not know that.

 

All of these solutions have different levels of criteria for approval and success. Some are size-based, and some are viewed as alternatives, but boy do they work! Pricing is a factor also, and each of those solutions brings a different level of financing cost to the table.

 

WHAT ARE BEST PRACTICES FOR EFFECTING WORKING CAPITAL FINANCE MANAGEMENT

 

Good asset turnover is key to effective cash management - Inventory turnover, and a focus on days sales outstanding are solid methods of optimizing cash flows.

 

Common pitfalls to avoid include overtrading ( expanding too quickly ) poor management of inventories,  and lack of a credit and collection policy. All of these can lead to a situation where it is difficult for a company to meet business obligations.

 

 

KEY TAKEAWAYS 

 

Working Capital relates to money a business needs for financing day-to-day business operations

A/R, Inventory and payables are key components of working capital

A business can access short-term working capital or permanent working capital

 

  

 CONCLUSION     

 

Effective cash management practices are key for all businesses. Understanding what makes up working capital and the business financing options available allows a company to be well-informed about cash flow management strategies.

 

Regularly review the business working capital finance situation and adjuting to ensure adequate fund area available allows a business to operate in a smooth manner, Talk to the 7 Park Avenue Financial team to help address issues and solutions to cash flow needs.

 

Businesses that are proactive in focusing on healthy finances will always have a solid advantage over the competition as they achieve financial stability and a focus on long-term business success. 

 

If you want to investigate any of our proposed solutions to both immediately and from a long-term perspective fix your financing and cash flow issues call 7 Park Avenue Financial, a trusted, credible and experienced business financing advisor.  Those cash flow working capital solutions are just around the corner.

 

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

 

 What Are The Types of Working Capital Finance 

There are two types of working capital finance: permanent working capital and temporary working capital. Permanent working capital is the minimum amount of working capital that a company needs to operate on a day-to-day basis and meet financial obligations via the company's liquidity. Temporary working capital is the company's working capital required to finance its seasonal or cyclical activities and maintain a company's financial health around the company's ability to succeed and grow.

 

 

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

The Power of Working Capital: How Commercial Business Finance Loans Can Propel Your Business Forward

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YOU ARE LOOKING FOR CANADIAN BUSINESS FINANCING

Commercial Business Finance Loans for Working Capital

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

        Financing & Cash flow are the biggest issues facing businesses today

               Unaware / Dissatisfied with your financing options?

Call Now! - Direct Line - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

Email - sprokop@7parkavenuefinancial.com

 

 

 

UNLOCK YOUR BUSINESS POTENTIAL: COMMERCIAL BUSINESS FINANCE LOANS FOR WORKING CAPITAL

 

 

INTRODUCTION

 

Commercial business financing loans are a crucial part of allowing your business to meet its working capital needs. Those funds are needed to allow your company to fund day-to-day operational costs and meet obligations around inventories, accounts payable, payrolls, and rent and fixed debt payments.  We're taking a look at the types of business loans and how you can make the most of solid business finance strategies.

 

Recently we came across the thought that knowledge without wisdom is dangerous. Wow! That seemed to us totally applicable to thousands of Canadian business owners and financial managers who struggle to manage or find working capital and commercial business finance loans and solutions for their companies.

 

But what about combining knowledge with the wisdom of experience? Now that’s a concept! Yes, it might take some time to investigate a solution but boy, in the long run, wouldn’t it be worth it?

 

 

UNDERSTANDING WORKING CAPITAL LOAN SOLUTIONS 

 

Working capital loan financing can greatly enhance cash flow for businesses that have seasonality or sales that are cyclical in nature inside their business model and industry. The ability to access funding during off-peak periods of the business is essential as unpredictable revenue streams will create constant cash flow challenges.

 

It's never easy when Canadian business owners and financial managers are out there looking for solutions.  Although rates interest rates in Canada are generally perceived as 'quite low' the ability to access cash flow solutions is still a challenge.

 

WHAT ARE THE TYPES OF WORKING CAPITAL LOANS - WHICH ONE SUITS YOUR BUSINESS?

 

TERM LOANS -   A  term loan is a lump sum cash installment type of loan that is repaid over a specific period of time - It injects permanent working capital into the business.

 

BUSINESS LINES OF CREDIT -  A line of credit is a revolving credit facility that allows the company to draw on funds as needed under a pre-determined limit.  A business credit line can be sourced via a bank or an asset-based lender, and there are significant differences between the two facilities.  Businesses pay only on the amount of facility that is used, and, similar to other short-term working capital facilities they provide a solution to ongoing fluctuating cash flow needs.

 

Commercial bank facilities from Canadian chartered banks are the obvious solution. If your firm can withstand financial statement due diligence around historical profitability, ratios, covenants, and personal collateral of owners then you're clearly eligible for the lowest cost form of business financing in Canada.

 

Asset-based credit lines are a solid alternative to commercial bank lines of credit. Smaller and start-up firms can access basic working capital facilities that simply margin A/R and inventory in a combination type arrangement.

 

 

INVOICE FINANCING / FACTORING / CONFIDENTIAL ACCOUNTS RECEIVABLE FINANCING -  Businesses can fund unpaid invoices of immediate access to cash - Outstanding invoices are either ' sold ' or ' assigned' to a factoring company or a bank and this method of financing addresses the issues of late paying clients and the need of every company to invest in sales growth by carrying accounts receivables.

 

BUSINESS CREDIT CARDS / SHORT TERM WORKING CAPITAL LOANS / MERCHANT CASH ADVANCES via online lenders  -  Small business loans via business credit cards provide the convenience of accessing working capital as well as allowing companies to access finance under an interest-free grace period. Merchant cash advances via an online lender can fund retailers via projected future credit card sales and repayment from the business bank account is via daily or weekly payments from cash inflows to the business.

 

 

Revolutionize Your Business Operations with Working Capital Loans

 

 

All of the above financing solutions serve a unique purpose, and every business owner and financial manager should consider which options best suit the business needs of the company.

 

If your company has a solid asset base, and good cash flows from a historical perspective, then you of course have a stronger chance of being more successful in business financing.

 

On the other hand, if you find yourself experiencing hyper-growth, or coming out of a period of financial losses or turnaround scenarios then you need some help in both identifying and, even more importantly, accessing commercial business finance loans and solutions.

 

At the end of the day, your solutions boil down to traditional or alternative... it’s as simple as that.  Many new solutions that we focus on with clients are viewed as alternative, ( compared to traditional banks ) but the reality is that these types of financings are gaining traction every day.

 

That’s where the assistance of expert advice, coupled with wisdom and experience can really pay off we think.  Doesn’t it make sense that if you haven’t even heard of some of these cash flow solutions then you probably also don’t have the knowledge and expertise to comfortably access them?

 

 

THE PROS AND CONS OF WORKING CAPITAL FINANCING SOLUTIONS 

 

KEY BENEFITS -   Working capital financing is typically easier to access than long-term debt financing and unliked equity financing it is non-dilutive in nature, allowing a  company to access business capital without giving up ownership/control while funding daily commitments of the business and other operational costs.

Working capital loans offer several benefits and drawbacks that businesses should be aware of before making a decision.

Companies with a history of profit and cash flow can qualify for unsecured financing

 

DRAWBACKS - Some working capital solutions come with higher interest rates and loan costs , and in some cases may require additional collateral - Business owners will often have to demonstrate a strong personal credit history

 

Other solutions you can consider are :

 

LEASE FINANCING

PURCHASE ORDER FINANCING

SR&ED TAX CREDIT FINANCING

SECURITIZATION

 

Talk to the 7 Park Avenue Financial team about how these solutions work and how they can benefit your business.

 

THE IMPORTANCE OF WORKING CAPITAL FINANCING SOLUTIONS

 

Effective working capital management solutions are critical to the overall financial health  and business growth of your company. The ability to monitor and finance current assets and current liabilities around everyday business expenses allows your company to be efficient and eliminate the risk of a cash flow crunch, while all the time allowing the business to capitalize on growth opportunities.

 

Whether your company is early stage or a start-up or experiencing fast growth the right working capital loan will provide the necessary funds to expand and grow the business into current or new markets. The key is to ensure you have a financing solution tailored to your company's specific needs with repayment terms that make sense for your business.

 

 

CONCLUSION 

 

Every business needs the financial tools it requires to cover basic cash flow needs. Understanding the different types of cash flow management financing available and the requirements needed to apply for the best working capital loans for your business.

 

 

So, a bottom line? How about this - Experience and wisdom are a powerful combination in business  - Call 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing working capital wisdom with... you guessed it... experience in business financing options.

 

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

 

When You Should Consider a Working Capital Loan 

 

Businesses should consider working capital loan solutions when they are challenged to meet the financial obligations around  every day business expenses  - It is critical to use this type of financing for short-term needs, versus long-term investments in the business such as expansion or purchasing assets or technology 

 

 What are the types of Working Capital Loans?

Types of working capital loans include term loans, business lines of credit, and government loans under the Canada Small Business Financing Program small business loan via a participating financial institution such as a bank or participating credit unions, which now include lines of credit and working capital solutions (  for companies under 10 million in annual revenue or projected revenue), with no prepayment penalties. Loan amounts up to 1.1M dollars in total are offered under the program.

Invoice factoring/invoice discounting are financing solutions used by thousands of small businesses, with funds received the same business day for invoices generated to clients -  and some companies also consider short term loans under the merchant cash advance solution offered by some business lenders.

 

 

What is working capital? 

 

Working capital refers to the funding a company requires to finance day-to-day obligations. It is the difference between the current assets and the current liabilities on the balance sheet - Current assets are balance sheet assets that can be converted into cash and current liabilities are short-term obligations due within a year.

 

  

How is working capital calculated?  

Working capital can be calculated by the subtraction of current liabilities from current assets. This business calculation allows the business to determine if it has enough capital to fund expenses and obligations.

 What is working capital efficiency? 

Working capital efficiency is a calculation which measures how effectively a company uses working capital to fund sales growth and maximize profitability. By effectively managing asset turnover in receivables, inventory, and payables a company can generate sales growth with a minimum amount of working capital around short term business expenses.

 

  

What are the requirements for a BDC loan?  

 

Business Development Companies (BDC) is a Canadian government non-bricks and mortar business bank that provides business term loan financing via a predetermined credit limit to small business owners / SMB's that have good past credit history and profits. A business plan is often required, as are personal guarantees of the business owners, as well as a good personal credit score,  and their ability to invest owner capital in the business to secure loan financing. Minimum credit score requirements in the 650 range are required to get a working capital loan. The BDC does not offer a business line of credit.

 

 

 

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