YOU WANT TO FINANCE A COMPANY – YOUR COMPANY!
SMALL BUSINESS LOANS IN CANADA / FINANCING FOR CANADIAN FIRMS
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
Business financing in Canada. How to finance a company is in fact a question that many owners and financial managers ask themselves... in hindsight. It's all about smarter borrowing decisions.
UNDERSTANDING YOUR SMALL BUSINESS FINANCING ALTERNATIVES
Hindsight as we know is... great! But isn’t there a better way to assess your options and alternatives in the Canadian business financing landscape? We tell clients we think there is. In some cases, alternatives to business loans such as monetizing assets or addressing internal asset turnover issues will make sense. Business owners are constantly searching for business financing guides to help them make better decisions. They want an application process that's accessible and solutions that will work for their specific industry needs. Let's dig in.
UNDERSTANDING YOUR FINANCING TIMELINE NEEDS
Your timeline perspective when you approach your overall finance strategy around your capital structure goal is key. Simply speaking are we talking about short-term, intermediate or long-term financing alternatives and solutions? Short term for the purposes of our discussion tends to be 1 year, while intermediate could well be 3-5... And long term. Well, it's 5+ years of course. Some financing you require might be short term in nature while in other circumstances a term loan, typically 3-5 years in length might be the solution.
The Canada Small Business Financing Program, which is a government-guaranteed loan makes sense for many firms such as franchises, start-ups, early-stage firms, etc. Government small business focus also relates to other government programs such as the SR&ED program for r&d innovation, highly important in today's competitive global economy.
At 7 Park Avenue Financial we finance sr&ed claims, accelerating the cash flow on government refundable tax credits. Repayment terms are flexible and in fact, the repayment schedules is as good or better as any other non-government loan from a commercial lender. The ' SBL LOAN' is a great tool for any start up requiring financing.
RISK AND BENEFITS
Each finance solution your company undertakes has upside and downside scenarios. One might not necessarily be better than another, especially if the overall cost or rate is your prime yardstick measurement. It's all part of a business credit building process your firm undertakes over the life of the company.
EVERY INDUSTRY HAS DIFFERENT FINANCING NEEDS
In some cases, business owners/managers are forced to endure the worst fate possible - becoming economists of sorts! That's because you also have to step back sometimes and understand some of the economic, political and industry issues that are pertinent to your business. These conditions may have an influence on your ability to borrow funds or access business credit. If your industry is temporarily' out of favour' with lenders you're in somewhat of a potential ' dire straits ' scenario that may force you to access non-traditional type funding.
Business plans are always helpful in accessing commercial lending sources for businesses in Canada. At 7 Park Avenue Financial we prepare business plans and cash flow projections that meet and exceed the requirements of commercial lenders and banks - at a cost that is very reasonable! That allows firms to access working capital loans and other debt solutions that allow your company to fund daily operations and explore and capitalize on growth opportunities.
HAVE YOU INVESTIGATED INTERNAL SOURCES OF FUNDS
While it’s easy to look at outside solutions when you're thinking of ' funding ' for a small business loan, the reality is that there are numerous internal sources of funds. They are many times overlooked. Just better turnover of assets - ie inventories and receivables, or better management of payables all lead to strong internal cash flow and working capital for all small businesses - allowing firms to grow and invest in marketing campaigns, etc.
GOVERNMENT LOANS AND BUSINESS GRANTS
In 2022 the Government of Canada made major changes to the government-guaranteed small business loan program - All these changes are positive! The program added new types of financing and new loan classes, as well as increased the number of funds a company can borrow - Previously many banks and credit unions were often reluctant to process and administer these loans due to the amount of ' paperwork ' involved in the process - Many of these ' burdens' have been removed.
The majority of the government small business loan is guaranteed to the bank by the federal government. Term loans with generous amortizations can be used to finance land and buildings, new or used assets and technology required by the business, as well as leasehold improvements to rented premises / leased property.
Term loans are lump sum loans with a monthly payment - and come with a one time fee on approval . Business credit cards are often also provided. Farming businesses in Canada have a separate and similar program, and also have access to FCC loans.
Even better intangible assets can be now financed, as well as lines of credit and working capital financing is now available. The loan cap for any one borrower under the program was increased to 1.1M $ and businesses must have less than 10 Million in actual or projected revenue.
TAX CREDITS
Canada's SR&ED program provides refundable tax credits to companies performing r&d via eligible expenses allowed under the program - These credits provide up to 35% refund for Canadian-controlled private companies around work performed in the research and development area of their business under certain criteria - Talk to the 7 Park Avenue Financial team on how these credits can be financed in advance of filing your year-end refund claim for small projects and larger r&d projects.
MEZZANINE CAPITAL / CASH FLOW LOANS
Cash flow loans are more appropriate for companies that can demonstrate a combination of good cash flow and growth prospects - so banks and business lenders will focus on historical cash flow performance by examining several years of financial statements and cash flow performance, as these cash flows are the collateral for the loan.
4 ISSUES YOU NEED TO ADDRESS IN BUSINESS FINANCING
But when you do need your external finance strategy to be in place it then boils down to three key areas of your business needs - they are:
The cost of the financing - interest rates, fees, etc - The interest rate is important, but so is access to business capital for the loan amount you require
The amount of risk to both your firm (and your lender/financial institution)
The overall effect of the debt/business loans, or asset monetization on your balance sheet and business assets - ie will this financing increase your overall solvency or endanger it?
Personal credit history/credit score of owners - are they acceptable to banks and commercial lenders; The focus is on your overall business credit profile and the due diligence around that issue
KEY TAKEAWAYS IN FINANCING A BUSINESS
Numerous types of business financing solutions are available to business owners and entrepreneurs - These financings can come from traditional financial institutions as well as alternative lenders
Debt financing is typically under a term loan structure with fixed installments regarding repayment
Equity financing dilutes ownership but necessitates giving away part of the ownership in a business
Mezzanine capital finance is a bridge between debt and equity financing
CONCLUSION - BUSINESS LOANS AND BUSINESS FINANCING IN CANADA
All businesses will at some time require access to capital in excess of their current finance structure - and that applies to small companies up to larger corporations. The goal of the business owner should be to find the funding model that best suits their business and industry.
Is business financing in Canada a challenge? Whether you are a new business or established it pretty well always is if you talk to clients we meet daily. So take a step back when your goal is to finance a company with the right business loan solution, properly, and keep issues as we have mentioned top of mind.
Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with proper vision when it comes to debt financing strategies, effects, and alternatives. Let's get started!
FAQ: FREQUENTLY ASKED QUESTIONS/ PEOPLE ALSO ASK /MORE INFORMATION
What are the different ways to finance a company in Canada?
There are many options to finance a business in Canada - most notably via bank loans - Business borrowers should know that banks will often collateral and personal guarantees.
While a small portion of businesses in Canada may be eligible for venture capital financing businesses that qualify for VC funding are typically earlier-stage companies that are in high growth mode - and who are prepared to give up significant equity. Angel investors are similar to VC funders although these are typically individual investors who finance start-up firms for potential future ownership. Often the long-term goal of these types of investors is to participate in a public offering via the sale of shares to the public
Debt financing and cash flow financing via asset monetization are the most common forms of funding for businesses, as are financing new or used assets via leasing equipment from commercial finance firms for an equipment purchase. Short term working capital loans such as merchant cash advances are available via online lenders/online banking services.
What are the disadvantages of debt financing?
Companies that borrow under debt financing solutions must ensure they have the capital inflows to meet day-to-day funding needs as well as repayment of debt - Different economic conditions in the general economy may make it challenging to borrow capital during economic downturns in the general economy or a specific industry. Not all businesses can meet the credit requirements imposed by traditional lenders such as banks for the amortization period they require. Start-up and new businesses are often viewed as high risk by traditional lenders.
Click here for the business finance track record of 7 Park Avenue Financial
