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SMALL BUSINESS FINANCING 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?
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Business finance options in Canada. How does the Canadian business owner and financial manager assess commercial loans and other needs for growth and survival? What are the alternatives when it comes to business financing? Let's dig in.
THE IMPORTANCE OF CASH FLOW
More often than not it always comes down to those two words ' cash flow'. While everyone accepts the importance of that term sometimes it's difficult for the owner/manager to assess the importance as they are wrestling with growing revenues or profit issues.
WHAT ARE THE MAJOR TYPES OF FINANCING FOR BUSINESSES
Businesses are financed via a combination of debt financing as well as owner equity. The other main type of financing is cash flow finance which is the monetization of the assets of a business such as a line of credit on inventory and accounts receivables. Financing comes from traditional banks, non-bank commercial lenders, and government loans such as the Canada Small Business FInancng Program
HOW DO YOU CHOOSE THE BEST METHOD OF FUNDING FOR YOUR BUSINESS
So how does the business owner ensure that the right type of financing is in place? While traditional bank commercial loans are often perceived as the ' go to ‘in reality, all types of business financing, both traditional and alternative can address your needs. Oh and by the way, you don't need to take on more debt all the time, sometimes it’s a case of managing or monetizing your existing assets.
MANAGING ASSET TURNOVER IS KEY
Simple better asset turnover in accounts such as inventory and receivables significantly enhance cash flow. And just using the right financing for the right need makes your firm a better cash flow and working capital manager. In some cases, commercial real estate such as owner-occupied premises will have to factor into your overall finance structure.
EQUIPMENT LEASING TO THE RESCUE
Take the replenishment of assets such as equipment as an example. Using lease financing as an option can provide a multitude of positives around replacing assets to enhance your operations and competitiveness. Using effective lease strategies to their maximum allows you to grow your business. Some of those very basic tools include the effective use of operating leases, matching the term of the lease to cash flows and useful life expectancy of the asset, etc.
GOVERNMENT SMALL BUSINESS LOANS ARE GREAT FOR STARTUPS AND FRANCHISES
While the 'go-to' for asset acquisition in Canada is leasing almost 80% of the time as experts tell us, business owners in the SME sector can also acquire equipment via the Government small business loan financing program. It offers big guy corporate benefits to the little guy, and that’s a rare thing in the Canadian business landscape.
For example, under this program terms of 5-7 years are available, personal guarantees are limited to 25%, and there is no charge to repay the loan early. Sometimes even the big guys can't negotiate that one! The program is a term loan structure at an attractive interest rate - many business people assume wrongly that it is a cash flow short term loan, which it is not! The government designates Canadian banks and some credit unions as the financial institution that administer the program.
It's important to distinguish between term loans and short term business cash flow needs.
ASSESSING OPTIONS
Many business owners in the Canadian business landscape, certainly in the SME (small to medium enterprise) sector are unfortunately not known for their planning skills. As a result, they are not always proactive in addressing financing needs until a crisis. Other challenges they have include the inability to understand what options are in fact available - therefore they spend hours, days, weeks and months chasing financing options that are never meant to be.
Many business owners, again we're talking about the SME sector often do a poor job of separating their personal financial life from their business life. Issues such as business credit cards or using home equity lines of credit to finance their business can backfire in a big way. We encourage owners, whenever possible, to separate business and personal finances. After all, isn’t that one of the main reasons you incorporated anyway?
SOURCES OF CANADIAN BUSINESS FINANCING
7 Park Avenue Financial Business finance options in Canada 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 / short term loan/merchant advances
Royalty finance solutions
Purchase Order Financing
Short Term Working Capital Loans/ Merchant Advance
Securitization
While smaller businesses are always looking for a low interest rate the interest rates for small businesses will vary according to overall credit quality and type and amount of financing needed.
CONCLUSION
Which one or what combinations of these are right for your firm with respect to your business needs? Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in assessing alternatives that make sense for your business.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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