Canadian Business Financing Advice And Solutions - Not Always Just About Cash

 

YOUR COMPANY IS LOOKING FOR  CANADIAN BUSINESS FINANCING SOLUTIONS AND ADVICE!

HOW TO GET A BUSINESS LOAN AND GROW YOUR BUSINESS

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

 

  

 

INTRODUCTION   

 

Financing is a key goal for business owners looking to finance growth and success.

 

Business loans and new capital can fuel various ventures, from starting new projects and purchasing equipment to scaling operations. However, securing financing can seem intimidating, particularly for those unsure and inexperienced.

 

Let the 7 Park Avenue Financial team increase your approval odds for business financing. These steps span from drafting a robust business plan to establishing a credible credit profile. So, whether you're a budding early-stage company or a thriving established business, let our guide equip you with key insights to secure the necessary financing to propel your business forward.

 

 

HOW CAN YOU TELL YOUR BUSINESS IS DOING WELL

 

Business owners and managers that are ‘non-financial’ in their backgrounds often need to know how to ‘‘scorecard’ their business. They want to know how to make intelligent decisions about running and moving their business forward.  The owner/manager wants to know they are managing their assets properly, allowing them to grow and profit.

 

Acquiring financing is critical for any business seeking to scale, branch out, or seize fresh opportunities. Proper financing can unlock avenues for hiring, marketing enhancement, equipment acquisition, financing and purchasing leasehold improvements,  and more.

 

However, securing financing can be difficult, especially for small enterprises or startups.

Notwithstanding these obstacles, obtaining necessary funding remains a cornerstone for business prosperity. A lack of sufficient financing can inhibit growth or threaten your business's existence by dedicating time to comprehending your financing options and formulating a business financing strategy.

 

ASK YOURSELF THESE KEY QUESTIONS

 

 

It might seem improper to answer a question with questions but at the end of the day, the business person needs to have a solid handle on some key basics.

 

They might include:

 

Are we financing our current assets (A/R and inventory) properly? Can commercial property be acquired?

Can we take on more debt, or would bringing new ownership equity be necessary?

Do we have proper operating efficiencies when collecting our accounts or turning inventory over?

If the owner/manager understands the relevance of those questions and where to seek answers, they are on the right track to doing well in their business in the Canadian economy.

 

WHAT THOSE RELATIONSHIPS!

 

A key secret to doing well is in what we have termed ‘relationships ‘. Many call them ratios – but if you understand the relationships between just some key numbers in your financial statements that revolve around profit, efficiency and solvency, you are on the right track to doing well.

 

Here is a quick example. Let’s focus on ‘profit ‘. Take your total profit for the year and divide it by the assets in your business. It’s a simple arithmetic calculation—no financial degrees are required. 

 

It measures how you use your business’s assets relative to the profit it generates. All industries have different results based on capital intensiveness, etc. So if you think you’re different, you are! But not when compared to others in your industry. Most lenders and investors will look at this simple comparison to justify loans or new equity.

 

One final point on doing well. The numbers in your financials don’t always provide answers – but they can offer some great questions you need to address!

 

WHAT ARE THE SIGNS OF A BUSINESS THAT IS DOING POORLY?

 

While many people use sales /revenue as a yardstick of success, we are too financially oriented to focus on that. Solvency is therefore important. When you can’t pay bills or suppliers, a lot of business distress starts.

 

That’s when it's time to focus on a ‘back to the basics ‘strategy, including improving liquidity by refinancing. Many companies are doing poorly because they simply have too much debt relative to their asset base. 

 

Lenders such as banks have some basic ‘yardstick ‘measurements regarding cash flow and the amount you can borrow. If you don’t meet those yardsticks, lending is curtailed, and your company has the risk of entering into the ‘death spiral ‘that we read overtakes many firms.

If your client base is drifting away and owners and shareholders are dissatisfied, it’s time for the business owner to assess the problems.

 

 WHAT STEPS CAN THE BUSINESS OWNER TAKE 

 

Business owners need access to good data when the company is perceived internally or externally as not doing well.

 

Key focus on sales, financial controls and availability of financing become key. At this point, objectives must be realistic, allowing the business to handle the challenges of not doing well because of general economics or operations.

It’s all about understanding your financial position and using that data to address your challenges.   We return to  ‘relationships ‘ again; that could be focusing on cash flow strategies, analyzing cash outflows, looking at inventory controls, and rationalizing headcount.

 

  

PREVENTING BUSINESS FAILURE  

 

 

There’s, of course, no guarantee regarding business failure. One factor that we see often is that many businesses equate sales and profits as ‘cash flow ‘.

 

That kind of thinking has led to some of the greatest financial debacles in business history – so we always encourage clients to have a solid handle on that difference – and it’s a large one.

 

We can jokingly say that to avoid all future cash flow problems, we encourage owners and executives to compensate sales staff on collections – but that has never done well!

 

  

TALK TO THE 7 PARK AVENUE FINANCIAL TEAM ABOUT GETTING YOUR BUSINESS ON TRACK!

 

Small businesses are crucial to Canada's prosperity as a whole. Across all industries, small businesses represent roughly 98%. However, the importance of Small Businesses varies from bank to bank. Statistics Canada estimates that nearly half of small companies fail within ten years of operation. Because of these risks, it is tough to find funding!

 

 

 

 

While you can pay turnaround experts and consulting firms large amounts to get your company in turnaround mode, the reality is that in many cases, the business owner and manager have access to a lot of quality information in their networks of accountants, lawyers,  peers, bankers, etc.

 

Getting credible advice from trusted, experienced parties never have to be expensive or time-consuming. While our firm, 7 Park Avenue Financial, focuses solely on business financing, we have spent countless hours helping clients achieve overall business success through referrals, advice, etc. Count on 7 Park Avenue Financial to be a trusted partner with business advice and financing solutions for Canadian small businesses, offering advice and solutions for the best small business loans.

 

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

What are the Different Types of Business Financing Options

When it comes to securing financing for your business, a variety of options are available. Each option has pros and cons, and the best choice for your business depends on your specific needs and circumstances. Here are some of the most common types of business financing options:

 

1. Bank Loans

   • Among the most common forms of business financing for assets financed
   • Often have lower interest rates and longer repayment terms.
   • Ideal for financing long-term projects or investments.
   • Qualification may be challenging, especially for startups or businesses with less-than-stellar credit.

2. Canada Small Business Financing Program  Loans

   • Government-backed loans tailored for small businesses.
   • Offer advantageous terms and interest rates, providing affordable financing.
   • The application process can be prolonged and intricate, making qualification potentially difficult.

3. Equipment Financing

   • Specific loan type for the purchase of equipment or machinery.
   • The procured equipment usually serves as collateral, making it suitable for businesses needing expensive equipment or machinery.

4. Invoice Financing

   • Financing type permitting businesses to borrow against their outstanding invoices.
   • Beneficial for businesses with elongated payment cycles or cash flow issues, as it enables access to capital without immediate payment requirements.

5. Merchant Cash Advances

   • A financing option that allows businesses to borrow against future sales.
   • Generally quick and straightforward to secure, but it can be costly due to high-interest rates and fees.

 

 

 

 

What are Factors Lenders Consider When Evaluating Business Financing Applications

 

When evaluating business financing applications, lenders will consider a variety of factors. These factors will vary depending on the type of financing you're applying for, but some common factors include:

 

1. Credit Score

   • A significant factor that lenders evaluate during loan application reviews.
   • A higher credit score enhances approval odds and can lead to more favourable loan terms and interest rates.

2. Business Plan

   • An essential component for securing financing.
   • The plan should encompass business goals, strategies, and financial forecasts, demonstrating a comprehensive understanding of your business and its potential success.

3. Collateral

   • Required for many financing types, typically equipment or property, to secure the loan.
   • The collateral's value and type may differ based on the lender and the specific financing sought.

4. Cash Flow

   • Lenders assess a business's cash flow to gauge its loan repayment capacity.
   • Cash flow should exhibit a consistent and positive income stream, with adequate revenue to manage expenses and debt payments.

 

 

 

 

 

What are 5 Essential Tips for Securing Business Financing

 

 

Now that you understand the importance of securing financing and the different types of funding available, let's look at some essential tips for increasing your chances of getting approved.

1. Develop a Solid Business Plan

A solid business plan is essential for securing financing. Your plan should outline your goals, strategies, and financial projections and demonstrate that you have a clear understanding of your business and its potential for success. Your plan should also include a detailed budget and cash flow projections, explaining your plan for repaying the loan.

 2. Maintain Good Credit

Your credit score is one of the most important factors lenders consider when evaluating your application. To increase your chances of approval, it's important to maintain good credit. This means paying your bills on time, keeping your credit utilization low, and monitoring your credit report for errors or fraudulent activity.

 3. Explore Alternative Funding Sources

Traditional financing options, such as bank loans and Government SBL  loans, may not best fit every business. It's important to explore alternative funding sources, such as crowdfunding, angel investors, or grants, to find the best fit for your business.

4. Build Relationships with Lenders

Building relationships with lenders can help increase your chances of approval. Take the time to research potential lenders and develop a relationship with them before applying for financing. This can help you better understand their requirements and preferences and demonstrate your commitment to your business.

 5. Be Prepared to Negotiate

When applying for financing, it's important to be prepared to negotiate. This means understanding the terms and conditions of the loan and being willing to negotiate for more favourable terms. It's also important to be prepared to walk away if the terms are unfavourable or the lender is not a good fit for your business.

 

 

What are common mistakes to avoid when seeking business financing?

 

1. Failing to Research Your Options

   • Important to research and understand financing options' terms and requirements.
   • Not doing so may lead to unfavourable terms or unsuitable loans.

2. Applying for Too Much or Too Little Financing

   • Both can be problematic. Too much can lead to unfavourable terms or inability to repay, while too little might not provide the necessary funding.

3. Failing to Prepare a Solid Business Plan

   • A well-prepared business plan demonstrating eligibility criteria is crucial for securing financing and a proper loan term.
   • Lack of a plan could result in an unsuitable loan or inability to repay.

 

 

 

What is the Canada Small Business Financing Program?

 

The Canada Small Business Financing Program (CSBFP) eases the process for small businesses to secure loans from financial institutions by distributing the risk with the lenders. The program has recently been updated to offer a participating bank or credit union to offer small businesses more financing products, a new class of loans, higher loan limits and terms, improved loan conditions, and reduced administrative effort.

Eligibility

Small businesses or start-ups operating in Canada with gross annual revenues of $10 million or less of gross revenue are eligible. The personal credit score of the owner must be satisfactory. Farming businesses are excluded from this program but can check out the Canadian Agricultural Loans Act Program for similar benefits and a competitive interest rate offered by banks and some credit unions.

Financing Available

The program caps the maximum loan amount for a borrower at $1.15 million for guaranteed small business loans.

• Term loans: Up to $1,000,000 per borrower, of which a maximum of $500,000 can be used for buying leasehold improvements or improving leased property and buying or enhancing new or used equipment. Of this amount, a maximum of $150,000 can be allocated for intangible assets and working capital costs.
• Lines of credit: Up to a maximum of $150,000 at a fixed rate or variable rate

Application Process

Financial institutions handle the program and are responsible for approving the loan for both new and established businesses.

You can discuss your business needs with a financial officer at any Canadian bank to secure funds, caisse populaire, or credit union sources. They will review your business proposal and decide on your loan application. After approving the financing, the financial institution will distribute the funds and register the loan with Innovation, Science and Economic Development Canada (ISED). Charitable and religious organizations are also now eligible for SBL loans.

What can be financed?

Term loans can be used to finance costs related to the following:

• Purchasing or improving commercial land or buildings
• Buying or upgrading new or used equipment via an equipment loan structure
• Acquiring new or existing leasehold improvements
• Intangible assets and working capital costs

Examples of term loan usage include financing commercial vehicles, hotel or restaurant equipment, computer or telecommunication equipment and software, production equipment, or the costs to purchase a franchise.

Lines of credit can be used to cover the business's day-to-day operating expenses under a revolving repayment schedule.

Interest Rates

Your financial institution sets interest rates for term loans which may be floating or fixed.

• Floating: The maximum chargeable is the lender's prime lending rate plus 3%.
• Fixed: The maximum chargeable is the lender's single-family residential mortgage rate for the term of the loan plus 3%.

For lines of credit, the maximum chargeable is the lender's prime lending rate plus 5%.

Registration Fee

A 2% registration fee applies to term loans and lines of credit based on the total amount loaned or authorized. The borrower must pay these fees to the lender, and they can be financed.

Financing Terms

Lenders can request an unsecured personal guarantee - Also, personal credit history is important to most, if not all lenders and must be satisfactory - typically, a credit bureau score in the 600+ range is required. For real property and equipment, the lender must secure the financed assets. For leasehold improvements, intangible assets, working capital costs, and when financing a line of credit, the lender must secure other business assets. How much financing can be achieved under the program is up to each participating lender.

 

 

What is the most common form of financing for a small business?

 

The most common form of financing for small businesses varies depending on the specific needs and circumstances of the company. However, typically, the most common forms include bank loans, small business loans, and lines of credit. Many small businesses also rely on personal savings or funds from friends and family. Venture capital or angel investment is common for startups and high-growth companies. Acquisition loans for a purchase and sale agreement of a business are also popular via bank and non-bank lenders.

 

Do business loans affect personal credit in Canada?

 

Business loans can potentially impact personal credit in Canada, especially if the loan requires a personal guarantee from the business owner. The owner is responsible for the debt if the business defaults on the loan. In such cases, any missed or late payments could be reported to the credit bureaus and impact the individual's personal credit score. Business owners must ensure they are viewed as financially responsible. However, if the business loan is solely in the business's name and does not require a personal guarantee, it should not impact the owner's personal credit.

 

What is the interest rate for small businesses in Canada?

The interest rate for small businesses in Canada can vary widely depending on the lender, the loan type, the borrower's creditworthiness, and other factors. For instance, small business loans offered by banks could have interest rates anywhere from around 3% to 6% or more. Loans from alternative lenders may have higher rates, potentially up to 1-2% / month or more.

 

 

Purchase Order Financing : A Canadian Business Financing Solution

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YOUR COMPANY IS LOOKING FOR CANADIAN PURCHASE ORDER  FINANCING!  

PURCHASE ORDER FINANCING COMPANIES CAN HELP YOU FINANCE LARGER ORDERS! 

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 

 

Fulfilling Customer Orders Made Easy: An In-depth Look at Purchase Order Financing in Canada

 

Purchase Order Financing? Is it your solution to growth, cash flow, and working capital challenges? Canadian business owners and financial managers are always challenged when required to fulfill customer purchase orders or new contracts where prepayment of a significant amount of goods is required to complete a large order or contract ultimately.

 

INTRODUCTION

 

Within Canadian business financing, purchase order (PO) financing is a solid solution that helps businesses with the necessary working capital to execute their customer orders and contracts. This short-term capital injection proves significantly beneficial for manufacturers, wholesalers, distributors, and import/export enterprises grappling with cash flow constraints or contending with substantial, unforeseen orders.

 

WHAT IS PURCHASE ORDER FINANCING

 

Purchase order financing, alternatively termed PO funding or trade financing, is an innovative financial strategy that equips businesses with the funds required to manufacture or acquire goods that have already been sold to their customers.

 

It serves as a financial safety net for companies that attract sizable orders yet face a shortfall in immediate cash flow or lack sufficient inventory to cater to this demand.

 

Businesses can more effectively manage their cash flow by accessing funds upfront to cover the costs of fulfilling customer orders. This means companies can accept larger orders without worrying about their cash-on-hand or inventory limitations, facilitating business growth and increasing market competitiveness.

 

Moreover, purchase order financing is not a loan, so it doesn't add debt to the balance sheet regarding company liabilities and does not require them to put up collateral. Instead, the funding is secured by the purchase order itself, which means the repayment comes from the revenue of the fulfilled orders.

 

This financing solution makes PO financing an attractive option for businesses aiming to maintain a healthy balance sheet while meeting increasing customer demands.

 

 

DOES YOUR LINE OF CREDIT FACILITATE LARGE ORDERS?

 

Typically, any line of credit needs the company has in place cannot facilities larger transactions involving a large purchase from a new or existing client and may include work in process inventory timing and pressure on your cash conversion cycle.

 

P/O FINANCE IS GROWTH FINANCING!

 

A new large purchase order or contract often represents the potential start to a large relationship that can grow large revenues and profits for your Canadian firm. Is there a solution?

 

One that you might want to consider is purchasing order financing. Under this type of financing (referred to as ‘ PO Financing '), the finance firm's payment is made directly to your suppliers for your order or contract. It is a unique form of working capital financing, allowing your company to fund goods manufactured or sold by a supplier, thereby relieving the stress of cash flow shortages during your business process.

 

THE FINANCIAL BURDEN OF LARGE NEW ORDERS AND CONTRACTS

 

Many companies are financially burdened when allocating valuable cash and working capital to supplier payments. ' P/O Finance ' is a solid mechanism to finance sales when you have decent gross margins to sustain the financing cost. The PO Financing company solution works well because many transactions involve extended payment terms based on supplier delivery and your customer's final payment.

 

That can easily, in many cases, be anywhere from 60-90 days, significantly increasing your ' cash conversion cycle. ' Purchase Order financing rates are higher than most financing based on overall complexity and risk but are an effective trade finance solution and are a part of supply chain financing solutions available to Canadian business owners. Export financing can also be augmented with EDC solutions.

 

WHAT ARE THE BENEFITS OF PURCHASE ORDER FINANCING

 

Purchase order financing offers numerous advantages to small businesses, including:

 

1. Ability to Fulfill Large Orders: PO financing empowers businesses to take on and fulfill substantial orders which they might otherwise be unable to afford, preventing missed opportunities and potential revenue loss.

2. Maintenance of Positive Supplier Relationships: This type of financing ensures businesses can promptly pay their suppliers, despite any cash flow deficiencies, thereby fostering positive and reliable relationships.

3. Simplified Financing Option: PO financing is a straightforward, accessible option requiring no credit checks or extensive documentation. The process can typically be completed within a few days, streamlining the funding procedure.

4. Flexible Payment Terms: Providers of PO financing often offer adaptable payment terms, enabling businesses to manage their cash flow and financial planning better.

 

 

WHY WOULD YOUR COMPANY CHOOSE A  PURCHASE ORDER FINANCING COMPANY 

 

Companies taking on larger purchase orders and contracts often have a significant overhead attached to the sale/project/contract. That issue, coupled with the extended payments, we have already referred to drains operating cash flow for your day-to-day operations. This allows you to complete the order, generate receivables from the PO Finance  Order, and collect from your customer. The financing charge is typically in the 3=5% range, so there needs to be a clear indication that your firm has the gross margins to support an additional cost in that range.

 

Firms with higher gross margins are great candidates for purchase order contract financing, and they are less so if they are in a low-margin commodity-type business. It’s all about the gross margin!

 

REASONS WHY YOUR FIRM MIGHT NEED TO ACCESS ORDER/CONTRACT FUNDING :

 

It is not hard to imagine why suppliers are asking for upfront payment. The typical reasons that we hear from our customers are:

 

1. They have reached their credit limits with suppliers of their bank

 

2. Many suppliers are overseas these days and do not want to commit capital to companies in other countries

 

3. Your firm is not mature, is in early-stage or start-up mode, and does not have the capital resources to commit to larger revenue opportunities via order financing. Therefore the simple financing process around paying your supplier via a letter of credit from the P O lender and then monitoring for delivery and acceptance, and payment to your firm is an attractive potential financing solution.

 

 

 

KEY POINT - As a technical point related to Purchase Order financing, business owners /financial managers should note that payments made by the P O Funding source do not include any taxes that may be charged to your order or deposits you have already received from buyers.

 

 

PREREQUISITES FOR A SUCCESSFUL PURCHASE ORDER TRANSACTION:  

 

Transactions are based on the reselling of manufactured products and finished goods.

 

  

HOW DOES PURCHASE ORDER FINANCING WORK?  

 

Your firm can generate reasonable profit after financing costs Suppliers are bona fide, and legitimately verifiable end-user client has a good commercial credit history.

The actual purchase Order must be non-cancellable

 

 WHAT IS PURCHASE ORDER FACTORING? 

It means that the customer promises to pay after the products are delivered. Because this arrangement creates a contract, the purchase order is valuable to companies, known as factors. A factor can fund a company's purchase order and give them the cash to produce and fulfill it. It is a structured finance solution that works.

 

At 7 Park Avenue Financial, many new clients enquire about P O's that require financing for less than 100k.

 

While this is possible, it is generally accepted in the marketplace that orders over this amount are somewhat more financeable and benefit all parties to the transaction regarding profits, deal size, etc. Remember also that your firm has what we call that 'cash conversion cycle' (every firm has one).

 

IMPLICATIONS OF FINANCING ON YOUR OPERATING CYCLE

There is a large number, often 2-3 months from when you receive orders, build and ship inventory or product, and then wait 30 days (or longer!) to collect from your customer. Purchase order financing is a solid solution to your cash conversion cycle. At 7 Park Avenue Financial, when we put together a purchase order financing facility, we stress to clients that this is very much an alternative financing scenario. Still, it offers you a solution that traditional Canadian banking or lending would not provide.

 

Therefore, your firm should ensure that you can demonstrate your customer's viability and fulfill the order or contract via this alternative financing method. One of the other advantages of supplier financing/purchase order financing is that from start to finish. It can be set up in approximately 14-21 business days, assuming your full cooperation on application forms, backup info, etc. Most Canadian business people recognize that financing of a certain size in a traditional banking or term lending environment might take significantly longer to complete.

 

 

BENEFITS OF PURCHASE ORDER FINANCING: HOW DO PURCHASE ORDERS WORK IN LOCAL / EXPORT FINANCING?

 

Utilizing this alternative funding method for certain sales allows you to take on orders and contracts, even in other geographics that otherwise might not be able to be considered as part of your growth strategy. Many opportunities are ' seasonal ' and must be seized confidently to avoid losing the sale or client relationship. Fostering good relations with suppliers re your payment history is key in any business relationship.

 

Because of the ' specialty finance ' nature of P O Funding, you benefit from lender expertise in this niche part of Canadian business financing, including flexibility around customized situations that might be unique to your order/contract.

 

KEY POINT - Business owners should be proactive in planning their financing around any significant addition in new business - this avoids the proverbial cash crunch and allows you to prevent reactive processes that, to say the lease, can be stressful for the business owner. Use the services of an expert or advisor to determine if PO Finance works for your transaction.

 

In certain cases, instead of a business line of credit, a combination of receivable factoring and Purchase order finance might be best suited to finance the transaction in combination with each other, given that a receivable is created out of your order and the factoring fund method of non-bank financing is less expensive than purchase order funding.

 

 

CONCLUSION - PURCHASE ORDER FINANCING CANADA

 

Purchase order financing is critical for numerous Canadian businesses, answering cash flow predicaments and facilitating expansion. Like any financial commitment, fully comprehending the terms, expenses, and consequences involved is crucial. Whether purchasing order financing or other funding alternatives, selecting the appropriate financial strategy can catapult your business to unprecedented success.

 

Let the 7 Park Avenue Financial team know how a purchase order financing company works and alleviates the cash flow challenges small businesses face in Canada. In summary, a purchase order loan/financing agreement is a unique niche within business financing and an effective means of financing working capital.

If you are new or not knowledgeable about this type of financing, speak to 7 Park Avenue Financial,  a credible and experienced and trusted business advisor who will guide you through key areas of Purchase Order Financing, including such things as minimum amounts that can be financed, credit application information, and the standard industry fees/rates. Short-term financing for larger orders managed successfully, will help your company achieve its growth goals while utilizing effective supplier financing arrangements.

 

  

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

 

What is Purchase Order Financing?

 

Purchase order financing, or PO funding or trade financing, is a financial instrument that empowers businesses to shoulder the expenses associated with manufacturing or procuring goods already sold to their clients. It is a financial safety net for firms that attract large orders but grapple with immediate cash flow or inventory constraints until the customer pays

Consider securing a significant order from a client, but present cash assets or inventory are inadequate to fulfill the order. With purchase order financing, this business opportunity need not be lost. A PO financing provider pays your suppliers directly, ensuring the order can be completed. Subsequently, you bill your client, who settles the payment now with the financing provider. The financing company deducts its fee and transfers the remaining balance to your account.

 

What are the Costs Associated with Purchase Order Financing?

 

A purchase order financing agreement has several benefits, but weighing its costs is crucial. Generally, charges for purchase order financing oscillate between 2-5%  of the monthly PO value. Although this may appear minuscule, it can translate to an annual percentage rate (APR) surpassing 40% when converted, making PO financing a considerable investment for businesses.

 

What are the  Pros and Cons of Purchase Order Financing?

Purchase order financing carries many unique benefits and potential downsides for businesses. On the positive side, it's accessible to growing companies and startups, doesn't overly depend on your credit rating, and offers quicker funding than traditional bank loans. The customer pays the financing company directly.

Nonetheless, it also has certain constraints. The company must cover the remaining balance if the financing company approves a business for a smaller percentage of the funding of supplier costs. In many cases, a personal guarantee may be required.

What are Other Options Besides PO Financing?

 

In some cases, PO Financing won't match business needs. If that is the case, several alternative funding mechanisms exist to explore, including:

Invoice financing, invoice factoring

Merchant cash advances from online financing companies

Business lines of credit

Term loans / Small business loans

Government SBL loans. Government loans offer versatility for varying business types of financing, and requirements vary compared po financing companies.

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Asset Based Financing Loans In Canada : How To Achieve The Right Mix Of Business Credit

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YOUR COMPANY IS LOOKING FOR CANADIAN ASSET-BASED LOANS FINANCING! 

Say Goodbye to Business Credit Cash Flow Challenges: Exploring Asset-Based Financing in Canada

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

 

Unlock Financial Flexibility: Discover the Advantages of Asset-Based Financing Business Credit Loans

 

Asset based financing is a unique part of the business finance landscape in Canada, providing flexible financing to businesses of all sizes and industries. Let's dig in!

 

INTRODUCTION

 

Maintaining a robust cash flow is a cornerstone of any business's success in today's swiftly changing Canadian business financing environment. However, accessing conventional financing can pose a hurdle for many firms for many different reasons.

 

Here, asset-backed lending presents a solid solution. Asset-backed lending utilizes a unique methodology to address liquidity issues by using a firm's physical assets like inventory, machinery, and accounts receivable as collateral. This flexible funding solution provides firms with the necessary capital to cater to immediate liquidity requirements, finance growth strategies, and capitalize on new market prospects.

 

Through asset-backed lending, enterprises can monetize the worth of their assets, enhance their financial adaptability, and confidently maneuver through liquidity challenges in their business.

 

Business owners and financial managers want to know how they can utilize these types of loans as a great solution for cash flow and working capital purposes to fund their business.

 

UNDERSTANDING ASSET BASED FINANCING

 

Asset-backed lending is a financial solution enabling companies to obtain loans or credit lines by pledging their assets as security.

 

Unlike conventional funding methods that heavily depend on a firm's credit score, asset-backed lending considers the company's asset value. Businesses can exploit assets like inventory, machinery, and accounts receivable to generate capital to overcome liquidity problems and spur expansion.

 

This method of financing proves especially advantageous for entities that fail to meet the rigid standards set by traditional financiers. These include newly established enterprises, companies with minimal business credit history, or those operating in sectors subject to seasonal variances.

 

By collateralizing tangible assets, asset-backed lending offers an alternate financing route that bridges liquidity shortfalls and sustains business activities during difficult periods.

 

  

WHAT DOES ASSET BASED LENDING MEAN FOR YOUR BUSINESS  

 

The reality is that asset-based lending means different things to different business folks. The truth is that it's part of the nontraditional method of financing a business in Canada that might be temporary or in some cases, more permanently challenging.

 

Although the owner/manager might think their need is somewhat unique, financing needs typically revolve around sales growth or key balance sheet issues that need a fix. We've never missed the true irony around how fast-growing or even explosive sales can become a huge financial and operational challenge, as many have experienced.

 

Fixed assets are often a key part of an ABL lending solution for additional liquidity. The equipment your company requires or has can be in a broad range of asset categories. Owners/financial managers are looking to acquire new or used equipment or refinance existing assets via better high leverage  - That 'refinancing' can often be part of a 'sale leaseback', a key category in asset-based lending. That strategy allows owners to 'free up' equity in assets and harness that equity via new cash flow and working capital.

 

How does that sale-leaseback strategy work for certain physical assets?  It's quite simple. Although business owners often have a strong sense of what a company's assets are worth, that is not what counts. It all usually comes down to an appraisal being done on the equipment, and when the appraisal comes back, a loan-to-value ratio decision is made against the appraised value.

 

For example, a lender may grant for a specific asset up to 90% of the face value for a security, 75% for residential real estate, or 60% if it is commercial. Real estate ABL is often a term loan structure with various options available, such as interest-only, annual renewals, prepayment conditions, etc

 

Usually, business owners can expect to receive a fairly high percentage of the liquidation value of the equipment and achieve the maximum loan amount. Still, this amount tends to be less than the asset's fair market value. It is essential to understand that the asset has to be free and clear of any liens or charges. In cases where a small amount might be owed to another lender, that amount can be paid out and bundled into the new loan transaction.

 

A key point in equipment refinancing is that the commercial lender will emphasize both the asset value and your firm’s ability to prove cash flow for repayment.

 

 There is a huge difference in how an asset-based lender looks at your asset and advances funds against it, versus a Canadian chartered bank.

 

There is technically no limit on the amount that can be advanced against equipment, although most transactions we see in the marketplace are less than 5M dollars.

 

In summary, asset-based financing means different things to different people. One of the key context areas of this type of financing is equipment financing -  yet numerous other forms of key categories in asset-based lending play a key part in solutions your firm might require and have access to.

 

 

TYPES OF ASSET-BASED FINANCING AVAILABLE TO CANADIAN BUSINESSES FOR OPTIMAL WORKING CAPITAL 

 

Accounts Receivable Financing solutions:  Factoring, Confidential Receivable Finance Via factoring companies

 

Inventory Financing Loans

 

Tax Credit Financing (Primarily SR&ED)

 

Cash flow loans

 

Equipment Leasing

 

Royalty Financing

 

Bridge Loans

 

 

HOW ASSET-BASED FINANCE SOLUTIONS HELP OVERCOME THE CASH FLOW CHALLENGE

 

Asset-backed lending can be a lifesaver for firms grappling with liquidity problems. By using assets like stock, machinery, and accounts receivable, companies can acquire the necessary capital to balance their payable and receivable accounts, ensuring seamless business operations.

 

A principal advantage of asset-backed lending is its adaptability. Unlike traditional funding options, asset-backed lending is not restricted to a particular purpose.

 

Companies can utilize the funds obtained through asset-backed lending for diverse objectives, like acquiring stock, covering payroll expenses, investing in new machinery, or financing promotional campaigns. This flexibility enables companies to meet immediate liquidity needs while supporting long-term growth plans.

 

Furthermore, asset-backed lending can aid companies in bolstering their financial stance. By capitalizing on the value of their assets, companies can liberate otherwise occupied capital. This enhanced financial flexibility can be used to negotiate more favourable terms with suppliers, capitalize on early payment discounts, or invest in strategic initiatives that improve profitability.

 

CASE STUDIES : 

 

Case Study 1: Manufacturer

A manufacturing firm confronted a severe liquidity crunch resulting from delayed client payments and the necessity to procure new machinery to satisfy escalating demand. The firm opted for asset-based financing, employing their accounts receivable and machinery as security. This decision facilitated them in acquiring a significant credit line, enabling them to purchase the needed equipment and bridge the liquidity gap. Thus, they could fulfill orders, augment their production capacity, and ultimately expand their operations, demonstrating how asset-based financing solutions can aid in overcoming financial hurdles and fostering business growth.

 

Case Study 2: Retailer

During a seasonal downturn, a retail outlet encountered liquidity issues. They held a large stock but suffered from limited cash flow due to declining sales. The retail outlet addressed its financial needs via asset-based financing, using its inventory as collateral.

 

The capital obtained allowed them to sustain their operations, settle supplier invoices promptly, and initiate marketing strategies to stimulate sales during the slow season. Asset-based financing's financial flexibility allowed the retail outlet to successfully steer through the liquidity obstacles and prepare for expansion, highlighting its effectiveness as a financing solution during challenging times.

 

 SUMMARY OF BENEFITS OF ASSET BASED  ' ABL ' FINANCING 

 

Asset-backed financing provides numerous advantages for businesses dealing with liquidity issues:

1. Access to Capital: Unlike traditional financing options involving protracted approval procedures, asset-based financing enables firms to leverage their existing assets to procure funding rapidly. This becomes particularly beneficial when urgent liquidity needs crop up, or firms aim to capture new market opportunities.

2. Enhanced Financial Flexibility: Asset-based financing doesn't rely solely on a company's creditworthiness. Instead, it focuses on the value of a pledged asset as collateral. Liquid assets such as accounts receivable are a large part of asset-based credit lines. This gives firms with imperfect credit histories or limited creditworthiness a chance to access funding based on their assets' strength. It also provides a pathway for businesses to realize the value of their assets and free up capital that could otherwise be locked up and underused.

3. Support for Business Growth: An asset-based loan can facilitate business expansion compared to traditional bank loan financing or an unsecured loan/business credit line / revolving line of credit. By offering access to capital, firms can invest in growth strategies, such as enlarging operations, introducing new products or services, or penetrating new markets. This ability to finance growth initiatives is vital for businesses striving to stay competitive and seize market opportunities.

 

CONCLUSION

 

Companies often confront liquidity issues in the present economic environment and might find conventional financing avenues inadequate. Here, asset-backed lending provides an intelligent resolution. By collateralizing tangible assets, companies can obtain the necessary capital to alleviate liquidity problems, finance growth strategies, and navigate uncertain periods.

 

Asset-backed lending has numerous advantages, including rapid capital access, enhanced financial adaptability, and backing for business expansion. Companies can make enlightened decisions about their funding requirements by comprehending the range of assets that can be collateralized, the procedure to secure asset-backed financing, and the considerations when selecting a financier.

 

Although asset-backed lending can transform many companies' financial situations, exploring alternative funding options and considering what best aligns with your company's distinct needs and objectives is crucial. By diligently scrutinizing your choices and collaborating with the appropriate finance partner, you can surmount liquidity problems and set your company up for enduring success in the current market.

 

 

Whether your firm is growing quickly, has restructuring issues, or other unique situations, you will benefit from call to  7 Park Avenue Financial,   a trusted, credible, and experienced Canadian business financing advisor with a track record of success to help with your growth opportunities via asset-based lenders in Canada.

 

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION

 

What is asset based finance?

The asset-based lending industry provides commercial finance  & financing via revolving lines of credit and term loans to small and mid-sized companies and larger corporations by using their collateral as security for short-term needs and day-to-day operations funding.

 

Accounts receivable, inventory, equipment, and real estate are collateral to back the loan for a line of credit or other business loan structure - this provides greater credit availability for companies that might not meet the credit history requirement of traditional financial institutions such as banks that offer unsecured loans. Lower interest rates for asset-based loans are commensurate with overall credit quality.

 

What are Common Challenges Faced by Businesses When Accessing Financing

 

In today's commercial landscape, companies encounter several hurdles that can affect their liquidity:

1. Unpredictable Customer Payment Cycles: Late or deferred customer payments can disrupt a firm's cash flow and make meeting financial obligations difficult. Additionally, companies operating in seasonal industries may face periods of booming demand followed by slower times, which can strain liquidity.

2. Limited Traditional Financing Options for SMEs: Small and medium-sized enterprises often struggle to access bank loans due to their limited credit history or lack of collateral. This can make securing essential funding to address liquidity issues or finance growth strategies challenging.

3. Economic Uncertainties and Market Volatilities: Changes in market conditions, alterations in consumer behaviour, or supply chain disruptions can all bear significant financial implications for businesses.

 

What Are Types of Assets That Can Be Used for Financing

 

Asset-backed financing can be obtained using a variety of physical assets owned by a company. The most frequently used types of assets for this kind of financing include:

1. Inventory: Firms can employ their stock as collateral to secure financing. This is particularly advantageous for companies with substantial inventory volumes or seasonal inventory fluctuations.

2. Equipment: Financing that uses machinery, vehicles, or other apparatus as collateral is known as equipment financing. This is especially beneficial for sectors that heavily depend on specialized equipment.

3. Accounts Receivable: Also referred to as invoice financing, accounts receivable financing allows firms to use their outstanding invoices as collateral. This enables businesses to access funds quickly rather than waiting for their customers to settle invoices.

4. Real Estate: Firms that possess commercial properties or real estate assets can leverage them as collateral to obtain asset-based financing. Real estate collateral can grant businesses access to larger financing amounts.

 

The specific assets eligible for collateral may vary based on the financier and the industry in which the firm operates. Businesses must comprehend the particular prerequisites and constraints of different asset-backed financing alternatives.

 

 

 

What Is The Process of Obtaining Asset Based Financing

 

The procedure for acquiring asset-based financing generally involves several crucial stages. While specifics can fluctuate based on the financier, the overall process can be broadly outlined as:

1. Application: The firm applies for asset-based financing by applying a financier. The application usually comprises details about the company, its financial status, and the assets designated as collateral.

2. Asset Evaluation: The financier evaluates the worth and quality of the assets employed as collateral. This assessment aids in determining the maximum sum that can be procured.

3. Due Diligence: The financier performs due diligence on the company, reviewing its financial statements, credit history, and industry prospects. This step assists the financier in assessing the comprehensive risk associated with extending financing to the company.

4. Proposal: Based on the assessment and due diligence, the financier offers a proposal detailing the terms and conditions of the asset-based financing. This includes the loan amount, interest rate, repayment terms, and miscellaneous fees.

5. Closing: If the firm consents to the proposed terms, the financier and the firm complete the required paperwork to formalize the financing agreement. This could involve legal documentation, security agreements, and other contractual duties.

6. Funding: Once the closing process is finalized, the financier disburses the approved funds to the firm. The firm can utilize the funds to address liquidity issues, finance growth strategies, or fulfill other financial responsibilities.

 

 

Alternatives to Asset-Based Financing

 

While asset-based financing can provide numerous advantages, exploring other financing alternatives that may be more aligned with your business needs is crucial. These alternatives could include:

1. Traditional Bank Loans: For businesses with robust credit histories and solid banking relationships, traditional bank loans can offer access to funds at competitive rates. However, these loans often demand collateral and may entail a more comprehensive approval process.

2. Business Credit Cards: These can serve as a short-term financing solution to address urgent liquidity needs. While they provide convenience and adaptability, they usually carry higher interest rates than other financing options.

3. Trade Credit: This involves negotiating extended payment durations with suppliers. It can assist businesses in managing cash flow by permitting them to delay payments until goods have been sold or services delivered.

4. Invoice Factoring: This entails selling your outstanding invoices to a third-party company at a discounted rate in exchange for immediate cash. It can be an effective method to enhance cash flow and evade the wait for customer payments.

 

Each financing option has its unique benefits and considerations. Hence, businesses must evaluate their particular needs, financial circumstances, and growth targets to identify the most appropriate financing solution.

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

Business Lenders In Canada : The Hunt Is On For Your Working Capital Financing & Loan Solutions

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Unleashing Business  Potential: Overcoming Financing Hurdles for SMEs in Canada

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        Financing & Cash flow are the biggest issues facing businesses today 

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YOUR GUIDE TO BUSINESS LOANS IN CANADA

 

Working capital financing and the right business loan/loans for their company have many Canadian business owners looking to either leave or search for new business lenders that meet their financial needs.  The hunt is on for small business lending. Let's dig in.

 

 

 

INTRODUCTION 

 

Capital access is key to growth and success in our rapidly competitive business world. Business owners and entrepreneurs frequently encounter the hurdle of securing the necessary funding to elevate their ventures.

 

Business lenders, experts in creating lending solutions, play a crucial role in this process. These entities can provide financial assistance for expansion, equipment purchase, or staffing. However, selecting a lender who comprehends your unique aims and challenges is crucial.

 

 

For Canadian businesses to flourish and reach growth goals, business lending access is essential. Still, small and medium-sized enterprises (SMEs) often face obstacles in securing traditional capital.

 

Fortunately, alternative finance options serve as a beacon for those struggling with bank financing. This article examines business lending's significance, SMEs' challenges in securing capital, and the abundance of alternative finance choices available.

 

 

 

WHAT IS THE ROLE OF BUSINESS LENDERS IN PROVIDING GROWTH CAPITAL  

 

Business lenders are key in driving your business growth, recognizing that capital is essential for entrepreneurs to expand, innovate, and hire. They supply the necessary funds enabling businesses to seize growth prospects and achieve objectives. Besides, lenders often possess sector-specific knowledge, offering valuable advice to help firms tackle difficulties and make wise choices.

 

Lenders offer various financing options, such as term loans, lines of credit, and equipment financing, tailored to businesses' unique needs.

 

These avenues allow firms to acquire funds for various conditions, including expansion, inventory management, working capital, or tech investment. Furthermore, recognizing the unique situations of businesses, lenders may provide flexible repayment options, offering solutions that align with your cash flow and ensuring loans serve as growth catalysts rather than burdens.

 

Collaborating with a business lender also offers non-monetary benefits. Unlike traditional banks, these lenders usually have a profound understanding of entrepreneurs and small business owners' challenges.

 

They are more inclined to take calculated risks and back businesses with potential, nurturing a trust-based, mutually beneficial relationship. Acting as valuable advisors, lenders can provide financial management, cash flow optimization, and growth strategy insights. This expertise helps businesses make more informed decisions, maximizing their success probability.

 

 

  

  

THE SME CHALLENGE IN CANADA   

 

Difficulties Faced by SMEs in Securing Traditional Capital: Regrettably, SMEs face multiple hurdles when attempting to obtain traditional bank financing.

 

Strict qualifying requirements often demand that businesses possess significant collateral and a solid credit history, which can be tough for emerging or small companies.

 

Besides, the bank approval process can be protracted and full of red tape, impeding firms from capitalizing on time-sensitive opportunities. Traditional lenders are also risk-averse, favouring loans to bigger, more established companies. These difficulties present a formidable obstacle for SMEs, limiting their access to necessary funds for growth and expansion. 

 

 

  

FINANCING A BUSINESS IN CANADA  

 

A  report in Canada's Globe & Mail indicated massive dissatisfaction with financial institutions regarding lending for small businesses  - referencing a 40% amount as the number of borrowing companies that are ' likely '  to leave their current business lender. Of great interest is that the main perspective of business owners/financial managers is that their bank or credit union does not understand their business when it comes to a small business loan, indicating a lack of confidence in the expertise of their lender.

 

The other harsh reality is that firms looking for SME COMMERCIAL FINANCE and loans don't have the option that major corporations do - that's for both short-term operating needs and long-term growth financing. Of course, those 'big boys' can tap into public and private equity as an example.

 

 CHOOSE THE RIGHT FINANCING & FUNDING FOR YOUR BUSINESS 

 

What are realistic options for small and medium-sized businesses in Canada for generating working capital and cash flow?  The lack of proper business financing prevents your firm from accepting larger orders or new contracts. That also entails waiting for 30, 60 or sometimes even 90 days for A/R to be collected.

 

 

The right working capital financing in place assists your firm in meeting its daily requirements and allows you to grow the business. It also allows your firm to extend credit on favourable terms to your customers.

 

Solution? There are several solutions to consider. If all firms had the same size and problems, we might have some easier decisions. However, when we meet with clients to outline working capital solutions, each company is in a different industry. They have other business models, and their funding needs vary by size and nature.

  

 

TYPES OF BUSINESS LENDERS  

 

 

Business lenders come in various forms, each with unique characteristics and advantages.

 

1. Traditional Banks: Offer various lending products like term loans, lines of credit, and commercial mortgages. They usually have rigid lending criteria, potentially requiring collateral or personal guarantees. Though they might provide competitive interest rates, their application process can be time-consuming and complex.

2. Online Lenders: These lenders are a popular alternative to traditional banks, using technology to simplify the lending process and grant quick capital access. They often have more flexible lending criteria and may fund businesses with less established credit histories. However, their interest rates might be higher than traditional banks.

3. Alternative Lenders: These include a broad spectrum of non-bank financial institutions, such as private equity firms, venture capital firms, and asset-based lenders. Specializing in specific industries or sectors, they can offer customized financing solutions that cater to businesses' unique needs.

 

 

 

 

 

  

CANADIAN BUSINESS FINANCING SOLUTIONS / FINANCING COMPANIES IN CANADA 

 

Let's recap some of the solutions available in Canadian business lending:

 

 

A/R financing/factoring / Confidential Receivable Finance / ABL Non-bank line of credit

 

Inventory loans

 

Bridge Loans

 

Sale Leasebacks

 

Non-bank asset-based lines of credit (these facilities combine your A/R, inventory and equipment assets into one borrowing facility that is margined much higher than bank facilities).  These facilities are often the best solution to overall operating financing needs - This type of borrowing does not put debt on your balance sheet - it monetizes / cash flows your assets!

 

Tax Credit Loans (SR&ED, etc.)

 

Royalty Financing

 

Equipment Financing / Leasing

 

 P O / Contract financing

 

Short-term working capital loan / Merchant Cash advances ( Good  credit scores for business owner's personal credit score are required  ) - parts of these programs allow you to apply online ( a typical loan term is one year )

 

Business credit cards - supplementing business lines of credit

 

 

While some firms in the SME sector will always consider angel investors, going public options, etc., these solutions are often not practical or realistic for the business owner.

 

  

SMALL BUSINESS BANK LOAN QUALIFICATIONS  

 

Canadian chartered banks offer several programs, but you should ensure you meet bank requirements. Some of those requirements are that you have been established and the business owners have a good reputation and reasonably solid credit history.

 

THE CANADA BUSINESS LOAN PROGRAM ( SBL LOANS CANADA )

 

The Government of Canada offers a Small Business Loan program which is one of the best programs in Canada for Canadian businesses. An attractive interest rate comes with the program and flexible repayment terms around monthly payments. Previously this program only covered::

 

Equipment

Leaseholds

Real estate

 

Important - In 2022, the program was significantly upgraded to include a higher loan amount available and provide access to working capital and a business line of credit.

 

To ensure these programs meet your exact needs, let the 7 Park Avenue Financial team help you with your loan applications, as many feel that when you apply for a loan from the government, there is some paperwork involved.

One other government entity on the federal side offers working capital term loans; these are cash term loans and are generally unsecured, with only the promise to pay your company and yourself as owner. Rates are excellent for what you are getting.

 

  

WHAT ARE THE BENEFITS OF WORKING WITH THE RIGHT BUSINESS LENDERS  

Working with business lenders offers several benefits for entrepreneurs and business owners. Let's explore some of the key advantages:

 

1. Capital Access: Business lenders supply crucial capital to boost growth, catering to needs like expansion, inventory management, or tech investment. They comprehend businesses' unique funding requirements and propose bespoke financing solutions accordingly.

2. Flexible Financing: Business lenders typically offer more flexible lending criteria and repayment terms than traditional banks. They provide customized solutions in line with your business's cash flow and growth path, ensuring loans facilitate success rather than hinder it.

3. Industry-specific Guidance: Lenders have sector-specific expertise, offering valuable advice on financial management, cash flow optimization, and growth strategies. They understand entrepreneurs' challenges and can provide insights for more informed decision-making.

4. Partnership Approach: Lenders are more open to calculated risks and backing potential-rich businesses. They partner in your success, dedicated to helping you reach your objectives. This approach fosters a trust-based relationship promoting long-term success.

5. Efficiency and Affordability: Compared to traditional banks, business lenders often have more streamlined application procedures and faster decision-making, saving time and enabling you to capitalize on growth opportunities promptly. Furthermore, these lenders can offer competitive rates and fees, making their services cost-effective.

6. Networking Opportunities: Lenders often possess extensive networks, potentially connecting you with resources such as industry experts, potential clients, or strategic partners. These connections can unlock new opportunities and further propel your growth.

 

 

   

 CONCLUSION     

 

Business lending access is vital for Canadian SMEs to thrive and grow. Nonetheless, obstacles in securing traditional capital have triggered the emergence of alternative finance options.

 

These provide a crucial support system for businesses unable to secure bank financing. Peer-to-peer lending and government-supported loans offer accessible, versatile, customized funding for diverse business needs. By adopting these alternative financing strategies, SMEs can unleash their growth capabilities, stimulate economic growth, and flourish in the ever-evolving business environment.

 

If you're  'on the hunt' for business lenders that make sense for your operating and capital needs, speak to  7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your small business loan options and other financing needs.

 

FAQ: FREQUENTLY ASKED QUESTIONS

 

What is Invoice Factoring?

Companies that need quick cash will benefit from invoice factoring. The company offers a percentage of the invoices to be paid now in exchange for funds upfront, and then they receive payments when their clients pay them back. One example is staffing companies that already have an employee's wages but are waiting until later during the month or year before getting paid by their client, so they can't survive without access to capital. Invoice Factoring allows companies to avoid negative working capital positions and stay financially afloat to meet business needs and debt payments.

 

How do you prepare for a business loan application?

 

You should be able to produce financial statements and demonstrate that your receivables and inventory are turning. It's great to have a forecast or a business plan, which also assists you as a good planning tool.

 

Smaller firms should try and avoid credit cards, merchant advances, or friend and family loans when business lines of credit from banks are not accessible  - they all work and are readily accessible but often are not the best alternative for financing costs and interest rates.

 

Preparing for a business loan application is crucial to increase your chances of approval and secure favourable terms. Here are some steps to help you get ready:

 

1. Assess Financials: Examine financial statements like balance sheets, income statements, and cash flow statements. Understand your income sources, costs, and financial ratios to comprehensively view your business's financial standing and identify the loan amount needed.

2. Verify Credit Score: Your personal and business credit scores significantly influence the loan application. Request your credit reports for accuracy, and work on improving your credit score by settling outstanding debts or resolving disputes, if required.

3. Formulate Business Plan: A well-drafted business plan showcasing your industry knowledge, market, and competition is vital. Include growth strategies, target market, and financial forecasts. Highlight how the loan will boost growth and your repayment strategy.

4. Organize Supporting Documents: Lenders require various documents like tax returns, bank statements, financial statements, legal documents (such as articles of incorporation), and business licenses to evaluate your eligibility. Ensure these documents are organized and easily accessible and meet loan details required by business lenders.

5. Foster Relationships: Cultivate relationships with potential lenders before applying. Engage in networking events, join industry groups, and interact with lenders on social media. Building a good rapport and understanding their lending criteria could enhance your chances of loan approval.

6. Evaluate Collateral: Collateral might be required depending on the lender and loan amount. Assess your assets and decide what you can offer as collateral. This could include real estate, equipment, inventory, or accounts receivable. Understand the associated risks and ensure you can meet the repayment obligations.

 

What is revenue-based financing?

 Revenue-based financing is a financing method that involves businesses obtaining capital in return for a share of their upcoming revenue. The repayment aligns with the business's performance, offering flexibility for companies with variable cash flows. Typically, startups or enterprises with consistent revenue models utilize this financing type.