YOUR COMPANY IS LOOKING FOR BUSINESS FINANCE SOLUTIONS!
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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?
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Direct Line = 416 319 5769
Email = firstname.lastname@example.org
SPECIALTY LENDING VERSUS BANK LENDING IN CANADA - EXPLORING THE SOLUTIONS!
According to most business owners and financial mgrs, we talk to, business finance in Canada doesn’t seem to happen at the speed of light!
So when the type of loan and cash flow needs your firm requires aren't happening as quickly as needed, are there alternatives. These alternatives include bridge loans and other specialty lending solutions for small and medium-sized companies in Canada.
These middle-market companies are focused on financing alternatives often not available to smaller firms with limited access to appropriate business funding solutions.
WHAT ARE YOUR SPECIALTY LENDING NEEDS?
Leveraged and management buy-outs are a common business requirement. Recapitalizations help companies keep their doors open by injecting cash into challenged businesses while expansions and growth financings provide the necessary capital for more success.
Turnarounds give hope to struggling businesses, and the right restructuring takes an operation that has excessive debt obligations to business finance freedom.
Let's dig in and examine some of that finance for businesses and business lending via specialty lenders and specific specialty lender finance solutions.
ADDRESSING BUSINESS GROWTH FUNDING / FINANCING SOLUTIONS
In most circumstances, specialty lending and bridge financing refer to non-bank borrowing, business loans that banks can't or otherwise won't make with flexible terms business owners are looking for when it comes to more information for business credit.
A lot of that comes back to the ' credit box, 'somewhat of a slang term for the ' risk appetite ' that any commercial lender is willing to take. There are, of course, numerous reasons why traditional bank financing can't accommodate your business financing needs - reasons such as lack of substantial profits, poor balance sheets, low owner equity, unsatisfactory collateral... and on it goes!
ASSESSING YOUR BORROWING STRATEGY
Traditional lenders such as Canadian chartered banks, insurance companies, et al. are in fact regulated around the types and amounts of loan risk they can take. They are often only self-regulated. They are prepared to take additional risks commensurate to the interest rates they will charge. Specialty lending from a finance company takes up where those traditional lenders leave off. Not in all cases, but certainly in most specialty lenders focus on collateral value and how you run your operations.
Their ability and expertise in valuing and realizing their security if need be is the key to specialty lending and the specialty lender profile. Their business loan might be complimentary to another senior lender you might be working with within certain cases.
Why Bridge Loans? What is Bridge Financing?
Although the specialty lending solution is always more expensive, it provides the ability to do a deal, save a company, etc., when that otherwise might not be accomplished via banks. Therefore the business owner/financial mgr. must be in a position to weigh the ' cost of capital ' against ' access to capital '!
We recommend that clients view the commercial lender bridge loan as a path to operational success and growth. Canadian business financing access is always viewed as a potential obstacle to success. 'Short term' is always the key in bridge loans, whether it's a restructuring scenario, a cash crunch, or supporting new business/orders/contracts for financing capital.
WHAT DO BRIDGE LOANS COST? HOW DOES PRICING WORK IN ALTERNATIVE FINANCE COMMERCIAL LOANS?
Numerous factors come into play around the cost of bridging financing and alternative finance solutions. Key factors include the quality and value of assets, the ability of the borrower to utilize the funds properly and for the right reason, potential exit strategies by the lender, and of course, the facility's overall size relative to the equity of the equity the borrower company.
We can, of course, make the blanket statement that alternative lending/bridge loans, etc., always cost more than traditional finance solutions.
As a borrower in the bridging loan process, you must clearly identify the use of the financing and your ability to repay based on the term requested. Many bridge loans have balloon payment scenarios/options.
At 7 Park Avenue Financial, we always focus on the need for both a business plan and a cash flow projection that identifies where the business is going. As a commercial borrower, you should identify how and when you will exit alternative financing solutions.
The alternative to shorter-term bridge loans and specialized financing solutions might sometimes be equity investments, but that type of solution comes with longer timelines and ownership equity dilution.
Typical Uses for Bridge Financing & SpecialtyLending Solutions
A firm can benefit in numerous ways when considering business financing solutions around the bridge loan and alternative finance. Many times a company is looking to refinance existing credit arrangements. In other cases, you or your firm might be looking to acquire a business or replenish existing working capital and cash flow needs.
In other cases, key management might be looking to a management buyout or leveraged buyout utilizing the company's assets. In more challenging scenarios, a company might find themselves in ' Special Loans ' at the bank and satisfy the workout team at a bank.
In the most severe circumstances, a firm with assets and a business plan will be looking for a ' debtor in possession financing or exiting from a receivership—traditional commercial lenders not always capable of working on those sort of circumstances.
Alternatives To Bridge Financing - More Information on financing solutions
A/R Financing facilities
Sale/leaseback Loans on unsecured assets
Working Capital Loans / Mezzanine Debt
SR&ED Tax credit Loans
Asset-based non-bank Credit Lines
Purchase Order Financing
Commercial mortgages are prevalent in the bridge loan environment. They allow your firm to refinance the commercial mortgage at more favourable rates at a future point in time. In commercial loan and mortgage financing in Canada, non-bank lenders are typically called ' B ' or ' C ' lenders, reflecting where they are in the credit risk profile.
Those ' B ' lenders, for example, are typical ' one notch ' down from traditional Canadian chartered banks. These ' B ' and 'C' business lenders are looking to fill out the story when your financing needs don't match that bank ' credit box ' we've talked about.
The majority of term loans, as we've noted, are usually on a 1-year term. That timeframe usually ( but not always !) allows the business to achieve the main purpose of the business finance need that arose, such as buying a company, refinancing, etc.
Business owners should expect to be asked for a first lien on any unencumbered enterprise asset. Perhaps even a second lien on working capital and other fungible resources.
Also, you may request a personal guarantee as a sign of the owner’s intention to work with the lender in good faith to repay the loan. The guarantee may, in some cases, be limited to the amount of the financing.
Most bridge loans are ' secured,' so they must consider any existing financing your company has in place with any other lenders, which might often include a Canadian chartered bank. Financing rates for specialized lending solutions will almost always come with higher financing costs.
Typical bridge loans are more often than not provided by commercial finance companies/niche lenders. That is usually the case, but not always; larger firms who are more stable can often obtain bridge loans at more normal interest rates from commercial lenders. These firms serve the SME COMMERCIAL FINANCE / MIDDLE MARKET needs of the Canadian business borrower.
Startup companies rarely fit the profile of companies who qualify for bridge financing, which typically is based on assets such as receivables, inventory, equipment, real estate, etc.
WHAT TO LOOK FOR IN AN EXPERIENCED BUSINESS FINANCE ADVISOR / COMMERCIAL LOAN BROKER EXPERIENCED IN BRIDGE LOAN / SPECIALTY LENDING
Your firm should be looking to access solutions tailored and flexible to your particular situation, taking into account your overall capital structure and the amount of time you require to put appropriate financing in place. In most cases, financing needs around the bridge loan process might be complex, and speed and expertise are the key requirements for these lending solutions.
Numerous industries have unique requirements around how they run and finance their business. If you're focused on an interim ' bridge ' solution to capital and cash flow business needs, speak to the dedicated team at 7 Park Avenue Financial for more information - we're a trusted, credible and experienced Canadian business financing advisor who can assist you with specialized lending needs.
FAQ: FREQUENTLY ASKED QUESTIONS
What are specialty finance companies?
Specialty finance firms are non-bank financing companies providing alternative financing to small and midsize businesses that might not have access to traditional bank finance. They provide an important funding niche for commercial borrowers - After the 2008 financial crisis, specialty finance firms emerged with a new look at business capital.
These companies fill in gaps for companies who may not get loans elsewhere thanks to their specialized lending products tailored specifically for borrowers' needs.
The ability of specialty lenders to work closely with borrowers on crafting innovative products tailored specifically around each borrower's needs has caused tremendous growth in non-bank finance solutions.
Click here for the business finance track record of 7 Park Avenue Financial