YOUR COMPANY IS LOOKING FOR BUSINESS CREDIT LINE!
SMALL BUSINESS LINES OF CREDIT FOR CASH FLOW IN CANADA
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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?
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 line of credit needs stem from your business's needs for operational and growth success, and it provides a valuable tool for day to day management of funding needs. Let's dig in.
YOUR SEARCH FOR BUSINESS CREDIT LINES IS A JOURNEY!
The interesting thing about these facilities is that their need in effect mirrors the ' journey ' of your business. They often start with the owner/entrepreneur struggling to realize the current assets he or she has grown through sales have depleted cash on hand.
Even worse is that traditional lending sources such as our Canadian chartered banks place a tremendous amount of emphasis on the personal financial resources, credit history, historical cash flow and outside assets of the owner/entrepreneur.
That brings us to the ' pivot point. ‘ It's where the owner/entrepreneur or his or her financial manager must be able to quickly and expertly know where to, and who to turn to.
WHAT ARE 3 CREDIT LINE ALTERNATIVES?
In the case of company credit lines, it boils down to three alternatives:
Banks
Non-bank ABL credit lines
Subsets of traditional and alternative lending that provide part or all of the financing need. Some small businesses and retailers choose to use business credit cards as an alternative source of business capital.
WHAT ARE THE QUALIFICATIONS FOR A CANADIAN BANK LINE OF CREDIT- THE UNSECURED BUSIENSS LINE OF CREDIT
There is no more apparent requirement than the need of a bank for approving business credit lines. It's all about your company's current and past financial statements, cash flow coverage, business asset and outside collateral, and owners' positive perception. Unfortunately, when any one of these is lacking, it's almost impossible to get financing approved. It's also important to note that a credit limit is typically imposed on bank facilities. Increases to your cash flow needs often require an additional application process for overdraft protection increases, etc.
Business loan and online banking solutions are a key attraction to commercial bank facilities - as well as the opportunity to get a business credit card associated with your facility. Banks are an excellent source of fixed-rate loans.
THE IMPORTANCE OF PERSONAL CREDIT HISTORY AND A GOOD CREDIT SCORE
For businesses at the lower end of the SME sector, mundane issues such as personal credit scores and personal net worth suddenly become ' critical' for bank approval.
INTEREST RATES ON BANK LINES OF CREDIT
We hasten to add that when your company can access Canadian chartered bank financing, the rates and the flexibility available are quite frankly unsurpassed. The interest rate on bank funding is clearly one of the lowest borrowing rates the small business owner can achieve in Canada. Of course, you only pay interest on business loc's on the amount you have drawn down and is outstanding under the terms and conditions of your credit agreement.
The business line of credit rate and interest charges are typically benchmarked against the current prime rate subject to credit rating quality assigned to your business by the bank. Banks, of course, are well known for transaction fees and other miscellaneous fees.
Some credit unions in Canada are business focused and offer most forms of commercial banking for typical business needs. Banks and credit unions also can provide commercial real estate needs through facilities such as commercial mortgages and bridge loans.
THE ASSET BASED LENDING ALTERNATIVE - THE NON BANK CREDIT FACILITY
ABL Credit: ABL (asset-based lending) is the non-bank alternative for the business line of credit. Here pretty well, only one thing counts - assets. Both short term and long term assets are in effect ' combined' into one revolving line of credit. These assets become the ' only ' collateral on your deal, not a ' secondary ' source as in Canadian banking facilities. In ABL, you keep your regular business bank account. Funds are deposited into your business account as you need them, subject to your borrowing base of accounts receivable, inventory, and fixed assets.
FORMULA DRIVEN BORROWING POWER
ABL credit is very ' formula ' driven as an operating line of credit - but for once, those formulas make sense. Borrowing ability typically is 90% of your A/R, anywhere from 30-70% of your inventory, and the true liquidating value of any fixed assets.
By the way, top experts tell us that in the U.S., over 30% of that business credit line borrowing is done by ABL facility providers. While that's not yet the case, we tell clients that that trend is, in fact, a positive one also.
So that brings us to ' subsets, ‘in effect small ' niches' in working capital and cash flow financing around your credit line requirements.
They include:
Factoring / Confidential Receivable Finance In third-party receivable finance, you maintain the same bank account. Business owners will be happy to know that factoring facilities are quickly and easily approved, and you may apply for any amount of financing needed. Have your bank statements ready, which are an excellent way of identifying the inflows and outflows of capital into and out of your business.
Inventory finance
SR&ED Tax credit loans
Working Capital term loans - while adding debt to the balance sheet, they do, in fact, inject permanent working capital into your business and act as a type of line of credit for business but not a revolving facility per se.
All three categories of the business credit line in Canada come with different costs. ABL facilities cost more but always deliver. Bank financing provides low-cost growth financing. And when niche financing is needed for various reasons or challenges, our ' subset ' trio as outlined above also delivers.
CONCLUSION
The business owner of small businesses in Canada will almost always be challenged for a source of funding for their firm. Seek out and speak to a trusted, credible and experienced Canadian business advisor when you're searching for that ' pivot point ' in business credit. Talk to us here at 7 Park Avenue Financial for Canadian business financing needs and your line of credit requirements.
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Stan Prokop
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