YOUR COMPANY IS LOOKING FOR SMALL BUSINESS FINANCING!
Small Business Loans & Finance Options for SME Canada
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?
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EMAIL - sprokop@7parkavenuefinancial.com
Sources of business financing. What we really mean is do you as a business owner or manager in a small business really understand the type of funding your company might need, and moreover what alternative to loans and finance exist in your search for a business loan in Canada.
Capital has always been a challenge for Canadian business, more so in the SME sector. While larger corporations have Chartered banks, advisors, and access to capital pools both public and private the ' little guy ' in the small and medium enterprise sector struggles to search for capital.
DEBT IS LESS EXPENSIVE THAN EQUITY - BALANCING THE LOAN DECISION
It really is a bit easier than some business owners or financial managers might think - it’s about knowing whether it’s the time to take on more debt, how you balance taking on more capital, and why loans and funding, seemingly expensive, are in actuality much cheaper than equity.
A NUMBER OF FINANCING SOLUTIONS CAN BE COMBINED TO MEET YOUR FINANCE NEEDS
Your ability to generate financing is of course what is going to make or break your growth aspirations. While there is probably no one perfect solution for all your financing needs the reality of the matter is that you can actually often ' cobble together ' finance sources that make sense when it comes to funding your firm.
As we hinted previously, you of course could consider equity investments into your firm via VC's or angel investors but the reality is these are demanding sources of capital and selling ownership at a point when you are starting to grow is in fact, quite simply, not optimal!
SOURCE OF CAPITAL FOR YOUR BUSINESS CAN BE EITHER TRADITIONAL OR ALTERNATIVE .. OR BOTH!
Let's then examine some sources of capital that are both traditional and a bit alternative. We say a bit alternative simply because many of those sources are becoming the new traditional when it comes to a commercial non-bank financing company or asset-based lender. Talk about a paradigm shift.
ASSET ACQUISITION SOURCES
Lease financing is a great example of traditional financing that works. You can use the cash to fund working capital for receivables and inventory growth. In Canada, lease finance is available for firms of all credit quality and asset finance requirements. While it quite often might be a bit more expensive than bank financing is simply less painful to acquire and is a solid way to finance the balance sheet.
WILL YOUR FIRM QUALIFY FOR SMALL BUSINESS BANK FINANCING?
No one is a bigger fan of Canadian chartered banks than us. To companies that are well qualified, they are a veritable ' buffet ' of funding and loans for cash flow, fixed asset acquisition, real estate, etc. Just make sure that you're in a position to qualify for bank financing or you might waste a lot of precious time. And remember also that the bank looks to alternative collateral, strong cash flows and balance sheets, etc.
DON'T FORGET THE GOVERNMENT LOANS
Although the Canadian banks administer Government SBL loans they in fact are underwritten by the government. These loans make bank financing seem quite a bit ' looser’... and that's a good thing. Because the government guarantees a major portion of your loan the bank financing on an SBL loan is flexible, competitive, and less restrictive from a personal covenant point of view. Interest rates under the program are exceptional given the challenge of new or small or early-stage firms trying to obtain business finance.
The small 2% service fee on an SBL loan is, in our opinion well worth the quality of financing and funding you receive with this product. Industry Canada, the ' sponsor ' of the program has provided statistics that almost 10 Billion dollars of financing have been provided via over 60,000 loans to Canadian businesses applying under the program. This government program, which is not a grant, is one of the best solutions for small business in Canada.
YOUR CUSTOMERS CAN ALSO FINANCE YOUR BUSINESS!
Are there some sources of business financing and funding in Canada you have not even considered. Some are very obvious, some less so. As an example let your customer finance your business! How? Consider an advance payment structure that also clearly identifies the commitment a client is prepared to take with you.
In the same vein as above ask suppliers for extended terms. If you're a valued client who has paid promptly in the past you've got more bargaining power than you think.
MONETIZATION OF TAX CREDITS
Monetize. That’s our alternative word for the day. Take a look at your balance sheet and if you have tax credits under the SRED program due to your firm you can also finance those. Borrowing against a tax credit is a solid funding strategy.
ACCOUNTS RECEIVABLE / AR FINANCING
Keeping in line with our monetization theme we are huge fans of receivable financing, aka factoring. By selling your receivables your balance sheet immediately becomes cash positive, there are no limits to this method of accounts receivable financing if you are in growth mode and the only trick here is getting into the right facility with the factoring company when it comes to looking at an invoice factoring program.
The process of financing your receivables via a finance/factor is simply setting up a facility that allows for a constant ' selling ' of your receivables to the third party. This allows you to receive cash automatically as you generate sales. Typically you are advanced 90% of the invoices immediately and the balance is returned to you, less a fee of approx 1.5-2% which is known as a factoring fee. This fee is often confused with an interest rate, which it is not.
CONSIDER A VENDOR FINANCE / CUSTOMER FINANCING PROGRAM
Many firms who have an actual product as opposed to service can take advantage of setting up their own vendor finance program. With a solid partner, the cost is pretty well zero, and provides you with increased selling power plus the obvious fact that you have provided a true total solution to your product - you make it, sell it, and finance it! Setting up a program is a lot easier than you think.
THE PURCHASE ORDER FINANCING OPTION
Supply chain financing or purchase order financing is also a solid alternative funding vehicle for your firm. If you have good vendors and qualified customers the PO financier will pay your suppliers directly, assuming the risk in the whole supply chain scenario. The ability to use alternative financing solutions such as PO finance as an example is a great way to take on larger transactions for your products or services.
CONCLUSION
Small business owners should focus on ensuring they have access to financial solutions that meet their business capital needs - That often is a combination of short term financing, term loans, business credit lines, and asset finance strategies that will help the company grow sales and profits with a loan amount/solution that works.
Never forget you have options, both traditional and alternative for funding via loans and monetization strategies in Canada. Speak to a trusted, credible and experienced Canadian business financing advisor today. It's all about the options!
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop 7 Park Avenue Financial/Copyright/2020
