YOUR COMPANY IS LOOKING FOR COMMERCIAL BUSINESS
FUNDING ALTERNATIVE FINANCING SOLUTIONS!
Business Loans / Working Capital/ Business Lines Of Credit
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Financing & Cash flow are the biggest issues facing businesses 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
Oakville, Ontario
L6J 7J8
ALTERNATIVE FINANCING VERSUS TRADITIONAL FINANCING
Businesses need to estimate the funds they will need ' overtime'. That might come from traditional commercial business funding and newer alternative financing solutions when they raise funds.
We say over time because those funds cover different periods in the company's growth and can come from banks or alternative lenders via numerous lending options.
Funding Roadblocks? Discover Your Alternative Path
Are you struggling to secure traditional business financing? Banks continue tightening lending criteria, leaving countless Canadian entrepreneurs without vital growth capital. This funding gap threatens expansion plans, operational stability, and business survival.
Let the 7 Park Avenue Financial team show you how Alternative Business Financing solutions provide accessible, flexible funding options for situations where conventional lenders say "no."
WE CAN CALL IT ' BUSINESS FINANCIAL PLANNING '
We can call this 'financial planning '; however, the whole process is more complicated due to the external financial and economic environment.
HOW MUCH DEBT LOAD CAN YOUR FIRM CARRY?
Naturally, after a firm develops solid estimates around capital and growth needs, the question then becomes, 'How much of this funding should be borrowed via debt? ' For example, term loans.
DEBT OR EQUITY FINANCING?
Contrary to what management and financial managers understand, debt is the cheapest form of long-term financing, supplemented by the fact that the interest on the debt is tax-deductible. So, should the business owner or financial executive take on all that debt?
Clearly, too much debt will restrict and potentially damage the firm, perhaps even exposing it to failure. Having said all that, the business owner still has a legitimate right to ask, "What is the appropriate amount of debt for my company?"
The answer is that a company has to plan to find a target debt ratio or capacity that reflects its business and industry, as well as the concerns of any of the owners regarding guarantees, etc.
The essence of the business owner's analysis is the ability to understand the company's cash flows, which will pay down or service that debt. Most business owners don't do enough planning in this area, and their analysis needs to be much more formalized.
Company owners quickly understand that because there is a limit to how much debt a company can take on, there is the potential for an influx of owner or equity capital. At that time, business owners and equity investors have to have a strong sense of the company's value, both currently and on a longer-term basis.
Practically speaking, entrepreneurs and people in all business sectors and companies of all sizes will never be eligible for Venture capital or traditional financing, most commonly associated with Canadian chartered bank finance. That's where alternative business finance solutions come in—small business loans and other viable options that are more accessible.
THE THREE C'S OF BUSINESS CREDIT
It sounds almost too simple, but the famous 3 C’s of business credit (actually, it's personal credit also) can help the business owner /financial manager determine if they are eligible for the full funding they might need. (In many cases, they will be eligible, but not for the full amount of borrowing they require to run/grow.)
So, those C’s? They are the world-famous (to finance people at least) character, capacity, and capital. Traditional financiers are risk-averse, so when debt is high or growth is rampant, alternative financing must and should be considered.
WHY ALTERNATIVE LENDING?
Alternative financing provides business capital to businesses outside traditional financial institutions, aka ' banks'! Commercial finance companies offer different business finance solutions, such as accounts receivable financing. non-bank business credit lines, etc - solving the challenge of fluctuating cash flows.
Alternative lenders can work more closely with customers to provide more tailored financing solutions for their business or industry. Most businesses just don't have the track record and can't satisfy bank lending requirements around collateral and balance sheet ratios. The appeal of alternative financing is the ability of a business to access capital faster and in higher amounts than banks.
A LIST OF POTENTIAL CANADIAN ALTERNATIVE LENDING SOLUTIONS
Some examples of alternative financial solutions include:
A/R Financing / Accounts Receivable Financing / Invoice Factoring Invoice financing and solutions for unpaid invoices, such as Confidential Receivable Finance are among the most popular and accessible funding solutions - A/R financing solutions help businesses meet day-to-day obligations around payrolls and their business operations via immediate cash, as well as providing cash to purchase products and services and take advantage of discounts
Inventory Loans
Access to Canadian bank credit/line of credit/term loan solutions
Unsecured business credit lines are the hallmark of Canadian banking solutions and bank lenders. They allow companies to manage accounts payable and receivable better. Key requirements include establishing a business with growing revenues and demonstrating profits and growth potential.
Non-bank asset-based lines of credit
Asset-based credit lines allow businesses to collateralize their sales and assets into one revolving business line credit facility. This allows the company to avoid temporary cash flow crunches, and these revolving credit facilities are often an interim full financial solution to companies experiencing financial challenges or seasonality in the business. Typical assets bundled into the credit line include accounts receivable, inventories, fixed assets, and commercial real estate, if the company owns and uses it. In some cases intellectual property can be included.
SR&ED TAX CREDIT FINANCING
SR&ED loans are an alternative financing method - short-term bridge loans that provide advance funding for refundable tax credits due to businesses that spend on r&d. The actual sred claim is the collateral for the loan - Banks typically are unwilling to finance this government receivable, so short-term tax credit loans are a perfect solution for businesses who wish to eliminate the waiting for the government refund, - that then provides growth funding for many firms which are in some cases startup, early stage, and pre-revenue.
EQUIPMENT FINANCING / ASSET FINANCE / TECHNOLOGY FINANCING
Cash flow loans / Mezzanine financing
Royalty finance solutions
Purchase Order Financing -
PO Financing helps companies fund purchase orders and contracts from new or existing clients, which otherwise might be challenging to fund if the company does not have the cash/working capital to fund them. P.O. Financing allows suppliers to get paid in advance for verified purchase orders when the company's client is creditworthy. The ability to finance pre-sold finished goods helps bridge the gap between sale and payment.
Merchant Cash Advances / Short Term Working Capital Loans / Business credit cards -
Focused on the owner's credit score - interest rates are higher, but access to capital if quick and flexible vis-à-vis repayment - loans are typically 1 year in duration -
Merchant cash advance loans are based on a formula around a company's annual sales - they are lump sum installment type loans, and companies typically qualify for loans in 1- 15% of annual revenues. Payments are automated and paid back monthly of bi-weekly.
Commercial Real Estate - Long-term or short-term financing is available for businesses who wish to purchase land or buildings, which allows businesses to add additional equity into the company.y
Business grants- Canadian government grants for small businesses
Federal and provincial governments provide several grant programs for Canadian businesses. Federal grants can be viewed at: https://www.canada.ca/en/services/business/grants.html.
Government Grants for new and existing businesses and other government loan programs provide financial assistance under various financing programs. Direct grants and matching contributions with your own money can assist in wage subsidies, research, and development. Talk to the 7 Park Avenue Financial team about tax credit financing and Grant financing.
Many businesses may wish to employ professional grant writers who can assist in the qualification process, which can be time-consuming.
Government of Canada Small Business Loans Program - The Guaranteed federal business loan finances leasehold improvements, fixed assets, and even real estate. The interest rate on the Canada Small Business Loan program is both competitive and attractive.
Recent changes to the program in 2022 significantly enhanced the federal loan guarantee program. The loans have a limited personal guarantee, a highly popular issue with business borrowers. Participating financing institutions, such as banks and credit unions, administer the loans for the federal government. Borrowers must have a reasonable personal credit score, and the financing categories under the loan include equipment, technology, leasehold improvements, and real estate.
New categories included in the financing program include franchisee fees, working capital and lines of credit. The new loan cap is 1.1M dollars. Talk to the 7 Park Avenue Financial team about BDC loan requirements and their offerings.
BUSINESS LOAN DOCUMENTATION REQUIREMENTS
Whether you are applying for a government business loan or other types of traditional or alternative financing, it's important to have a solid loan package in place. At 7 Park Avenue Financial, we focus on a business plan if required, as well as up-to-date financial statements and projections around a cash flow forecast that focuses on debt repayment.
Focus on the source and uses of the loan and be prepared to provide proper documentation around company business/industry, ownership information, and appropriate basic business information around management, any required purchase and sale agreements, aging of accounts payable/accounts receivable, fixed asset listing, etc.
CASE STUDY
Cash Flow Crisis to Controlled Growth
A Canadian manufacturer faced a critical equipment failure during its peak production season. It needed $175,000 immediately to replace essential machinery. However, its bank offered financing that would take 6-8 weeks for approval—far too long to prevent massive revenue losses.
After exploring Alternative Business Financing options, they secured equipment financing through a specialized provider who understood their industry. The flexible payment structure aligned with their seasonal revenue patterns, allowing higher payments during peak months and reduced obligations during slower periods.
The immediate funding prevented an estimated $320,000 in lost revenue while creating $45,000 in additional efficiency gains from the upgraded equipment. More importantly, the relationship established with their alternative financing partner provided ongoing access to working capital solutions, creating financial stability that supported 32% growth over the following 18 months.
CONCLUSION
Business owners must be totally focused on understanding the current realities of loan and debt negotiation. An experienced advisor can be invaluable here, and the quality of the lending partner becomes key.
Most business owners eventually realize that all the banks have, give, or take the same rates. They don't have the same people, though! Therefore, the quality of service and commitment from the lender become extremely important.
In summary, small business owners need to constantly assess their needs for debt or equity capital, whether immediate, intermediate, or longer term.
Cash flow and the owner's philosophy on borrowing will dictate how much business capital is raised and, as we have seen, from where. Owners who plan and understand the borrowing market will be more successful than those who do not.
Call 7 Park Avenue Financial is a trusted, credible, and experienced Canadian business financing advisor with expertise in alternative business lending options and tailored solutions for your company. It can assist you with your business funding needs.
FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION
What is alternative financing?
Alternative funding sources for small business owners are viable alternatives compared to solutions via traditional lenders and financial institutions such as banks. Some owners of firms with poor credit can still qualify for alternative funding solutions. Funding outside conventional banks and venture capitalists helps business owners with flexible alternative financing methods and various financing solutions that secure financing to meet their business capital needs.
Alternative funding options for small and medium sized businesses include invoice financing, business credit lines, and asset-based loans outside of traditional bank loan solutions.
Which industries typically benefit most from Alternative Business Financing solutions?
Alternative Business Financing benefits industries with specialized needs, including restaurants, construction companies, manufacturing businesses, retail operations, healthcare practices, and technology startups. These sectors often face unique cash flow challenges, seasonal fluctuations, or growth patterns that traditional financing fails to accommodate effectively.
How do I determine which Alternative Business Financing option offers the best value for my specific situation?
Determining the best Alternative Business Financing option requires analyzing your specific use case, repayment ability, funding timeline, and growth goals. Compare total cost of capital rather than just interest rates, consider payment structure alignment with your cash flow, and evaluate any additional benefits like reporting features or flexible terms that address your unique business challenges.
What makes alternative financing more accessible than traditional bank loans?
Alternative Business Financing operates with different qualification metrics focused on business performance rather than perfect credit history. Approval rates typically exceed 70% compared to bank approval rates below 30%, creating opportunities for businesses with shorter operating histories, credit challenges, or non-traditional business models.
How does alternative financing impact business cash flow management?
Alternative Business Financing solutions offer customized payment structures aligned with your actual revenue patterns. Options like revenue-based financing adjust payments during slow periods, merchant cash advances scale with daily sales, and invoice factoring eliminates waiting for customer payments, creating predictable cash flow that supports operational stability.
How do alternative financing options support business growth during economic uncertainty?
Alternative Business Financing creates stability during economic fluctuations through flexible funding that adapts to changing conditions. These solutions maintain availability when banks tighten lending criteria, offer scalable options that grow with your business, provide specialized industry expertise, and create diversified funding strategies that reduce dependency on any single capital source.
How do businesses transition from alternative financing to traditional banking relationships?
Businesses transition from Alternative Business Financing to traditional banking by strategically using alternative funding to strengthen financial profiles over 12-24 months. Successful alternative financing repayment establishes positive payment history, while improved cash flow demonstrates business stability, creating documented performance that traditional lenders recognize during future application processes.
- Build business credit scores through reporting relationships
- Strengthen balance sheets using strategic cash flow management
- Extend operating history with stable performance metrics
- Develop banking relationships before funding needs arise
- Create industry-specific performance documentation
What documentation requirements differ between alternative and traditional financing?
Alternative Business Financing typically requires only 3-6 months of bank statements, basic business identification documents, and simplified application forms, compared to traditional lenders demanding 2+ years of tax returns, detailed financial statements, and extensive business plans. This streamlined documentation focuses on recent performance rather than long-term history, creating accessibility for newer businesses or those with limited documentation capacity.
- Bank statements showing actual cash flow patterns
- Payment processing reports demonstrating revenue consistency
- Basic business registration and identification documents
- Simplified profit/loss statements (often self-prepared)
- Existing contract or order documentation proving future revenue
How do different alternative financing options compare in total cost of capital?
Alternative Business Financing solutions vary significantly in total cost structures - Cost comparisons require examining the effective annual percentage rate, fee structures, and repayment timelines to accurately assess the true expense relative to each option's benefits.
- Interest rates versus factor rates calculation differences
- Hidden fees have an impact on total financing expense
- Repayment structure influence on effective costs
- Industry-specific pricing variations
- Qualification requirements effect the available rates
Industry Statistics
- 61% of Canadian small businesses sought external financing in 2023, with 27% utilizing alternative financing sources outside traditional banking.
- The alternative finance market in Canada grew by approximately 33% in 2022-2023, reaching an estimated $2.5 billion in total volume.
- Average approval rates for alternative business funding exceed 65%, compared to traditional bank approval rates below 30% for small businesses.
- 47% of Canadian entrepreneurs who secured alternative financing reported that traditional banks had previously rejected them.
- The median funding amount through alternative business financing in Canada is $87,000, with processing times averaging 2-3 business days.
- Invoice factoring represents approximately 22% of the Canadian alternative financing market by volume.
- 83% of businesses using merchant cash advances reported the speed of funding as their primary motivation.
- Canadian small businesses wait an average of 72 days for customer payment, creating significant cash flow gaps that alternative financing addresses.
Citations / More Information
- Canadian Federation of Independent Business. (2023). "Small Business Financing Report: Alternative Solutions Gaining Ground." CFIB Annual Business Barometer. URL: https://www.cfib-fcei.ca
- Business Development Bank of Canada. (2024). "Alternative Lending Landscape in Canada: Market Analysis and Future Trends." BDC Research Report. URL: https://www.bdc.ca
- Canadian Lenders Association. (2023). "State of Alternative Lending in Canada: 2023 Market Review." Annual Industry Report. URL: https://www.canadianlenders.org
- Deloitte Canada. (2024). "The Evolution of SME Financing: Alternative Channels Creating Market Transformation." Financial Services Industry Outlook. URL: https://www.deloitte.ca
- Statistics Canada. (2023). "Survey on Financing and Growth of Small and Medium Enterprises." Government of Canada. URL: https://www.statcan.gc.ca
