YOUR COMPANY IS LOOKING FOR REFINANCING!
THE DEMAND LETTER! WHAT HAPPENS NOW?
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW/ CONTACT US - 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
"The best way to predict the future is to create it." - Peter Drucker
Struggling with business debt? Discover how bank refinancing can be your financial lifeline.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Business Refinancing solutions and working capital/cash flow solutions – Save time, and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Refinancing Bank Business Loans in Canada
Is a demand letter en route from your bank in Canada?
Perhaps you have already received it. It’s what we could call a very unwanted ‘Dear John’ letter in the private sector, and it’s for Alternative financing loans for your business survival.
Managing business debt is crucial for business owners, especially when considering options like refinancing to simplify repayment and reduce financial strain.
What is Business Loan Refinancing?
Business loan refinancing replaces an existing business loan with a new one, typically offering more favourable terms.
This can include a lower interest rate, extended repayment period, or other beneficial conditions. The primary goal of refinancing is to reduce monthly payments, improve cash flow, and save on interest costs.
Whether you choose to refinance with your current lender or a new one, it’s crucial to thoroughly evaluate the terms and conditions of the new loan to ensure it aligns with your business’s financial goals.
TAKING OUT THE SECURED LENDER
When refinancing a business loan, it’s essential to consider the position of the secured lender.
A secured lender holds a lien on your business’s assets, such as property or equipment, giving them a higher claim in case of default.
During the refinancing process, the new lender may require the secured lender to subordinate their lien, which can be a complex and delicate negotiation. Working with a qualified lender and attorney ensures a smooth transition and protects your business interests.
' TAKING OUT ' THE SECURED LENDER
In effect, you need to ' take out the bank ' via their current secured lending arrangement with you. It's our version of ordering takeout with a good dose of due diligence on your situation. Let's dig in.
NEW ALTERNATIVE FINANCING IS NOW REQUIRED
When we talk to clients who are formally or informally out of their favour, the challenge for the business owner and financial manager is to secure alternative finance solutions for business lines of credit, term loans, and asset monetization and acquisition.
That letter may well be the first step to refinancing your business.
HOW DID YOUR BUSINESS GET HERE?
The key to this whole exercise is to understand how your firm got here in the first place.
Although it’s a simple fact of ‘not paying on time’, in other instances it’s a breach of loan covenants or ratios, or perhaps it’s the bank’s view that collateral supplier for your financing, either personal or corporate, no longer has value.
In some cases, some form of dispute resolution might be required. Understanding the reasons for refinancing business debt is crucial to making informed decisions about improving financing terms.
ASSETS ARE THE KEY
The security your firm has provided and the collateralization paperwork around it gives the bank the right to enforce its actions.
If all parties were in agreement, the process would involve selling or monetizing assets in favour of the bank to repay the loan.
CATEGORIES OF FINANCEABLE ASSETS FOR DEBT CONSOLIDATION
This would include, as per the categories we have noted:
Real estate - if applicable
Equipment / Fixed assets
Accounts receivable
Inventory
Intellectual property if applicable
Types of Business Loans
Various types of business loans can be refinanced, each with its unique features when you refinance business debt -
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Term Loans: A term loan for business debt consolidation comes with a fixed interest rate and a set repayment term, typically 3 to 10 years. They are ideal for businesses looking for predictable monthly payments.
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Line of Credit: This type of loan provides a revolving credit limit, allowing businesses to borrow and repay funds as needed, offering flexibility in managing cash flow with no fixed monthly payment
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Invoice Financing: This loan uses outstanding invoices as collateral, providing businesses immediate access to cash based on their receivables.
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Equipment Financing: This loan type is used to purchase or lease equipment. It uses the equipment itself as collateral, making it easier to secure.
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Government SBL Loans: Guaranteed by Industry Canada, these loans offer favourable terms, such as lower interest rates and more extended repayment periods, making them an attractive option for many businesses.
When to Consider Refinancing
Businesses should consider refinancing under several circumstances:
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Interest Rates Have Dropped: If market interest rates have decreased since you took out your original loan, refinancing can help you secure a lower rate and reduce your monthly payments.
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Improved Financial Health: If your business has seen an increase in revenue or a debt reduction, you may qualify for better loan terms.
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Debt Consolidation: Refinancing can help consolidate multiple existing loans into a single, more manageable payment, simplifying your financial obligations.
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Leveraging Assets: If you have valuable assets, such as commercial real estate, refinancing can help you leverage these assets to secure a more favourable loan.
How to Refinance a Business Loan
To refinance a business loan, follow these steps:
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Evaluate Your Financial Health: Assess your business’s financial situation and creditworthiness to determine whether refinancing is viable.
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Determine Loan Needs: Identify the type of loan you need and the terms you seek, such as lower interest rates or extended repayment periods.
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Research Lenders: Compare different lenders, including banks, online lenders, and alternative financing options, to find the best fit for your needs.
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Gather Required Documents: Prepare necessary documents, such as financial statements, tax returns, and details of existing loans and collateral.
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Apply for the New Loan: Submit your application to the chosen lender and negotiate the terms to ensure they meet your business’s requirements.
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Review and Sign Agreement: Carefully review the loan agreement, ensuring you understand all terms and conditions before signing.
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Pay Off Existing Loan: Use the funds from the new loan to pay off the existing loan and begin making payments on the new loan.
By following these steps and considering the various types of business loans and refinancing options available, businesses can make informed decisions to improve their financial health and achieve long-term success.
ASSET-BASED NON BANK LENDERS ARE THE SOLUTIONS
What then are the alternatives to band demand letters when your loan has been called and you are in the bank category of 'underperforming special loans’.
One of them is alternative financing procurement via Asset-based lending. Typically, these are found via NON-BANK ASSET LENDERS who specialize in this form of financing.
YOUR NEW FOCUS: CASH FLOW
They are the solution when your job must include the ability to :
Save jobs for employees,
Keep your business assets,
Resurrect and grow your business under financial terms and conditions that make sense.
Almost all businesses of any significance these days are, of course, incorporated.
If a business is not legally incorporated it’s in effect a personal consumer situation which is an entirely different kettle of fish. Issues such as the owner's individual credit score/credit history always come up in business financing.
BENEFITS OF BUSINESS LOAN REFINANCING
Refinancing your company via an alternative non-bank lender allows you to maintain credit lines, acquire more assets if needed, and keep cash flow flowing.
WILL ANOTHER BANK REFINANCE YOUR COMPANY? SPOILER ALERT! UNLIKELY
In our experience, it is highly unlikely that another bank will provide the financing you need when you are in foreclosure proceedings with your current bank.
At 7 Park Avenue Financial, our logic is simple: People don’t typically like to purchase other people's problems.
So, starting fresh with new business relationships and financing is often the key to success. Naturally, if you can anticipate loan default and correct that scenario, that is the optimal, however less typical, solution.
THE ROAD BACK TO TRADITIONAL FINANCING
We would also add from our experience that many firms can stay in the bank SPECIAL LOANS category and find they are being allowed to go back to traditional arrangements with that same bank.
However, because relationships and promises have somewhat broken down, that is a much rare case.
THE BOTTOM LINE?
Receiving a demand letter means that time is of the essence. It allows you to review your situation and understand the next steps and options.
Your ability to work with a bank or a secured lender will create a best-case win/ win for your company and the lender. Negotiating a reasonable time to settle the demand is key. The goal is to ensure you have a plan to satisfy the secured lender.
The good news is that today's Canadian business financing environment is ultra-competitive, and the rise of alternative finance solutions in Canada has been very dramatic.
When your secured lender understands you are working with an expert with solid potential solutions, they will want evidence of that, which can usually be provided.
Understanding the bank's paperwork and your rights and obligations is key. Taking the high road is essential. Namely, proper reporting of your situation and collateral and funds flow. Accountants, advisors, and lawyers might well be key in your process.
Don't view the whole demand letter process as the end of the line; instead, view it as an opportunity to move forward under different financing conditions that will allow you to grow sales and profits again.
3 uncommon takes on refinancing bank business loans:
- Using refinancing as a proactive measure to hedge against future economic downturns
- Leveraging refinancing to facilitate strategic pivots in business models
- Employing refinancing as a tool for attracting new investors or partners
KEY TAKEAWAYS
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Rate optimization: Securing lower interest rates significantly reduces overall debt burden
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Term restructuring: Aligning repayment schedules with business cash flows enhances financial stability
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Consolidation strategy: Simplifying multiple debts into one manageable payment streamlines finances
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Collateral reassessment: Leveraging improved business assets for better terms unlocks value
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Credit profile enhancement: Utilizing refinancing to strengthen financial standing opens new opportunities
CONCLUSION
Asset-based loans, sale-leasebacks, and bridge loans are solid ways to fix the bank takeout.
If your company has received or thinks it will receive the DEAR JOHN demand letter and you need alternative financing and procurement of new credit, Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, for practical advice and takeout strategies.
Takeout will have never tasted so good!
FAQ
How can refinancing my bank business loan improve my company's cash flow?
Refinancing can improve cash flow by lowering monthly payments through reduced interest rates or extended loan terms, freeing up capital for operations and growth initiatives.
What long-term benefits can I expect from refinancing my bank business loan?
Long-term benefits include reduced overall debt burden, improved credit standing, increased financial flexibility, and the ability to invest in business expansion opportunities.
Is it possible to consolidate multiple business loans through refinancing?
Yes, refinancing allows you to consolidate multiple loans into a single, more manageable debt, often with better terms and a simplified repayment structure.
How might refinancing my bank business loan impact my company's credit score?
While there may be a short-term dip due to credit inquiries, successful refinancing can improve your credit score by establishing a positive payment history and reducing overall debt.
Can refinancing a bank business loan help my company overcome financial challenges?
Refinancing can be an effective solution for businesses facing challenges. It offers the opportunity to restructure debt, lower payments, and create a more sustainable financial foundation.
What documents are typically required when applying for a bank business loan refinance?
Financial statements, tax returns, business plans, and detailed information about existing loans and collateral are usually required for refinancing applications.
How long does the bank business loan refinancing process typically take?
The refinancing process can take a few weeks to several months, depending on the complexity of your business finances and the lender's requirements.
Are there any risks associated with refinancing a bank business loan?
Potential risks include prepayment penalties on existing loans, new fees, and the possibility of higher overall costs if the new loan term is significantly extended.
Can startups or new businesses qualify for bank business loan refinancing?
While more challenging, some startups or new businesses may qualify for refinancing with a strong business plan, valuable assets, or personal guarantees from owners.
How often can a business refinance its bank loans? There's no set limit on how often a company can refinance, but frequent refinancing may impact creditworthiness. It's generally advisable to refinance when significant benefits can be gained.
What factors do banks consider when evaluating a business loan refinancing application?
Banks consider credit history, business performance, cash flow projections, collateral value, and overall market conditions.
How does refinancing a bank business loan differ from obtaining a new one?
Refinancing specifically restructures existing debt, while new business loans provide additional capital without necessarily addressing existing obligations.
What strategies can businesses use to maximize the benefits of refinancing their bank business loans?
Businesses can maximize refinancing benefits by improving their credit profile before applying, carefully timing their application with market conditions, and negotiating terms that align with their long-term financial goals.
