YOUR COMPANY IS LOOKING FOR ALTERNATE FINANCING SOLUTIONS!
Alternative Finance For Small & Medium Sized Businesses
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Alternative sources of finance in Canada. Ever wondered what they are? I guess we can tell you that they are ' alternative’, and not ' traditional ‘, but that's not really telling the whole story. And those alternative financing solutions, generally non-bank in nature can be either substitutions for traditional financing, and, here's a surprise, sometimes complementary in nature! Business owners are clearly looking for financing alternatives to the banks. The alternative financing marketplace is taking off - some experts term it ' debanking '! Let's explain.
THE RISE OF ALTERNATIVE FINANCING SOLUTIONS IN CANADA
An article in America's leading business magazine caught our eye recently... it was saying business owners should be cheering for alternative lending sources because it was they took up the slack when the 2008 global meltdown happened. And that’s when of course business credit froze. And can we agree to not even talk about COVID 19 and the pandemic and economic issues around that!
No surprise that Canadian businesses found themselves in the same boat, being in many cases unable to finance inventory, grow sales, etc. Start-up financing sources are in many cases even more of a challenge for the entrepreneur.
SURVIVING THE CREDIT CRUNCH
In between traditional and alternative lending, there are numerous courses of action your firm can take to help alleviate ' the crunch '. They might include alternate pricing strategies, favourably negotiated supplier terms, new owner equity, etc. Great strategies, but sometimes just not enough!
While the majority of Canadian businesses think of ' the bank ' when it comes to pretty well any sort of financing the reality is that it's a brave new world out there. Things such as one on one lending relationships have a lot less emphasis these days, and many larger financial institutions are focusing on fees, not credit lines.
HERE IS A LIST OF KEY SOURCES OF ALTERNATIVE FUNDING FOR YOUR COMPANY - WHICH ONE/ONES? MAKES SENSE FOR YOUR BUSINESS FOR ACCESS TO CAPITAL
So what are some of those alternative sources of finance? They might include:
A/R Financing
Inventory Loans
Access to Canadian bank credit
Non bank asset based lines of credit
SR&ED Tax credit financing
Equipment / fixed asset financing
Cash flow loans
Royalty finance solutions
Government Of Canada Small Business Loan Program - The Guaranteed federal business loan
Merchant Advance / Short Term Working Capital Loans
Some solutions are long term in nature while many are simply provide immediate access to business capital, cash flow and working capital funding for sales.
AN EXAMPLE OF ALTERNATIVE FINANCING AT WORK - THE SR&ED PROGRAM
Let's provide you with a couple of examples of how alternative sources of finance either coexist or replace more rational financing in Canada. A clear example might be the tax credit. In Canada SRED (SR&ED) tax credits provide billions of dollars of capital to new, emerging, and established corporations.
In general, we can very comfortably say that the tax credits, which many companies book as a ' receivable' when they have filed them, are not financeable by our Chartered banks. Some will argue that, but we stand behind our comment. So the ability to finance a tax credit claim outside of your existing credit facilities is valuable. So in that respect, it's one example of an alternate finance vehicle co-existing with traditional finance. (By the way, film, TV and FX tax credits can be financed also in Canada)
ASSET BASED LENDING TO THE RESCUE
In a large number of cases, alternative financing solutions completely replace bank financing - mostly when ' the bank says no ‘, which they are sometimes wont to do! In that case receivable financing and asset-based lines of credit fund companies anywhere from 100k to 100 Million dollars! To show you an extreme even if your firm is in CCAA bankruptcy proceedings it can quite efficiently be financed by alternative financing - for example, the ABL solution. It is all about financing the balance sheet
CONCLUSION
While medium-sized firms and others explore venture capital and other public company type financing these simply are inappropriate for the vast majority of businesses in the SME sector of the economy. When the Canadian business owner and financial manager are looking for capital the process is actually quite clear. Ensure you have a clear use and need of funds, know what sources of financing ( traditional and non-traditional) are out there, and be prepared to accept financing solutions that are commensurate with your current situation if that involves weakness, issues,, need for creativity, etc.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with sources of alternative, or traditional! financing.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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