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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Office = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
Alternative finance lending companies in Canada are often viewed as the new frontier in Canadian business financing. Offering loans and asset monetization solutions to the business owner/manager has helped fill the gap for businesses lacking access to traditional bank capital. Let's dig in.
Both access to capital and convenience tend to be the hallmarks of why owners/managers in the SME Commercial sector turn towards this type of financing. Also, the ability to explore numerous solutions via the internet certainly has helped.
The traditionally higher costs of this type of financing ( there are numerous types of ' alternative finance ' ) certainly is not the reason popularity has exploded - it can easily be stated that that alternative financing is often 2-4 times current bank pricing in Canada, which is in the 3-5% per annum range.
Most business owners are keenly familiar with those bank ' algorithms' on debt service and cash flow ratios. While, in many cases, these same criteria are looked at by alternative, these folks are more comfortable with collateral and sales growth. Another key point is that the 'alternate lender' product line is quite robust - It includes:
Factoring
Confidential Receivable Financing
Inventory Finance
Sales Royalty Finance
Franchise Loans
Asset-based non-bank business credit lines
Sale-Leaseback/ Asset-based bridge loans
Equipment financing /leasing
Refundable Tax Credit Loans
This provides borrowers with a wider range of solutions that, in many cases, can be combined to provide a full financing needs solution.
A careful review of the robust ' alternative lender' offering shows that these solutions are primarily ' working capital ' and ' cash flow ' based, allowing owners/managers to avoid the dreaded 'D' term - debt. The other observation we can derive here is that the alternate financing is more akin towards ' dating'... not ' marriage '... as these solutions tend to be short-term in nature. In fact, it's the goal of many companies requiring alternate finance is to gravitate back to traditional bank-type solutions. No secret that bank financing costs and flexibility are most attractive for those firms that are approved.
Top experts in the U.S. maintain the growth in alternative finance lending companies is primarily due to the frustration borrowers exhibit in application time and complexity when dealing with banks.
It should be mentioned that alternative financing is also very ' start up' friendly. However, we advise clients they still need some ' skin in the game ' and reasonable personal credit history to maximize alternative lending success. We meet many clients with ' CRA' issues that can often be solved with alternate financing paying out the CRA arrears, often impossible via a bank solution.
Both start-ups and established firms can utilize 2 solid and recommended government solutions for financing. They include the Govt Small Business guaranteed loan and Canada's ' SR&ED' program, which allows for significant recovery of legitimate r&d expenses under the program rules. By the way, your SR ED refund can be then financed as soon as it is filed... or even earlier.
Your 'crash course' in alternative finance solutions can further be augmented by seeking out and speaking to a trusted, credible and experienced Canadian business financing advisor who can assist you with loans and asset monetization strategies that solve your challenges.
Stan Prokop
