YOUR COMPANY IS LOOKING FOR FINANCING ALTERNATIVES!
ALTERNATIVE LENDING / BUSINESS LENDING SOLUTIONS IN CANADA
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Financing & Cash flow are the biggest issues facing business today
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Alternative financing for business is revolutionizing the way Canadian entrepreneurs access capital, offering a lifeline to those struggling with traditional lending barriers.
Unlock hidden growth potential: Discover how alternative financing can transform your business dreams into reality.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Alternative Financing and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Alternative Financing for Business: A Comprehensive Guide
OBTAINING ALTERNATIVE FINANCING FOR YOUR BUSINESS
As a business owner, chances are you have experienced the challenges of finding alternative funding options.
We all know it can be challenging to find funding for your startup or grow your company when banks may not offer the financing your firm needs.
A NEW TREND IN FINANCING?
At first glance, alternative lending may seem like the latest financial trend.
But don't let that fool you; it's been around for a while and is here to stay! Alternative lenders have lots of benefits, but their speed and ease of application should be at the top of your list when considering them as an option.
There is no shortage of potential sources of capital; however, many business owners don't know where to start.
Let's dig in on the most popular options in today's marketplace and provide tips on navigating these new routes for business owners looking to finance their enterprises.
When it comes to ' Alternative Finance' in Canada, could it be that all that glitters is, in fact, gold?
We suppose that is just our way of saying that the Canadian business owner and the financial manager could reasonably appreciate loans and alternative financing options that might do the trick today!
Traditional bank and business loans are ' under attack,' and that's good for the SME borrower. We are told that small and medium-sized businesses propel the economy, and these firms need business funding.
We don’t think we can find too many business folks who admit that there is a whole new landscape in Canadian business, especially since the 2008 Apocalypse... aka the global meltdown in corporate and bank finance that curtailed the possibilities of a funding option for thousands of companies.
WHY ALTERNATIVE LENDING
Alternative lending is, in many ways, the future of business funding in Canada. In an era when banks are tightening their grip, alternative lenders have become increasingly popular for businesses to find financing without going through a traditional bank or credit union.
Alternative lending has opened doors for small business owners by providing new avenues outside of conventional banking systems as well as into other financial services not offered at most banks - some good examples being:
P O Financing
Tax Credit Finance
Recurring Revenue Financing
and others!
NEW ALTERNATIVES HAVE EMERGED IN CANADIAN BUSINESS FINANCING LENDING OPTIONS
That change has literally forced business / financial people to search out new alternatives and choices in financing their business versus traditional bank loans.
So while traditional financing became more restrictive,… alternative financing became… you guessed it… more popular.
The suitability of alternative financing options can depend significantly on the specific business model, as different models may align better with certain financial solutions.
It is important to note that interest rates are higher in the alternative lending space in Canada, but rates have come down due in part to the low interest rate environment.
Those higher interest rates produce access to capital that companies might not otherwise achieve. Small business owners are also expected to have decent credit scores and credit histories, although that is not often the key driver in most approvals.
That is not to say that Canadian traditional sources, i.e., our banks, aren't out there looking for new business… they are. It’s interesting for us to watch it from the outside because, invariably, they are simply competing with each other to take business away from each other that is already in place.
That’s little consolation for start-ups and high-growth companies, as you can imagine.
One common criticism of Canadian traditional financing, aka banks, insurance companies, etc., is that it takes time.
Nothing happens quickly in these highly regulated institutions. That is why non-traditional finance is viewed as more ‘ nimble. ‘
9 TYPES OF ALTERNATIVE LENDING SOLUTIONS
The business owner and finance manager who needs quick-term loans, equipment loans, and business credit lines have several solutions via alternative lenders and various finance vehicles.
If we had to summarize them, we could say they were:
1. NON- BANK ASSET-BASED LENDERS / LINES OF CREDIT
2. LEASING COMPANIES / EQUIPMENT FINANCING
3. CAPTIVE FINANCE FIRMS
4. MEZZANINE FUNDERS
5. TAX CREDIT FUNDERS - The SR&ED advance funding loan is one of the many innovative tools to help Canadian companies access their tax credit faster.
With this type of financing, your company has immediate access to funds, and as such, it no longer needs to wait months before seeing a return on its investment in research and development.
6. RECEIVABLE AND INVENTORY FINANCIERS / INVOICE FACTORING & FINANCING SOLUTIONS (FACTORING) -
Invoice financing involves selling unpaid invoices to a factoring company in return for a percentage advance. The structure and fees can vary depending on what you negotiate with the factoring company, but typically, it’s a fixed payment or percentage-based arrangement.
7.SUPPLY CHAIN P.O. FINANCE FIRMS
8. MERCHANT CASH ADVANCES / ONLINE LENDERS / BUSINESS CREDIT CARD SOLUTIONS
With a merchant cash advance, you can receive a lump sum loan of up to $150,000 in funding that is then repaid regularly based on your business's sales or future credit card sales.
Unlike traditional debt financing, such as loans and bank lines of credit, which are repayable at set times or dates regardless of your company’s finances, this type of loan repayment depends solely upon your revenue performance.
This makes it an attractive option for businesses that see themselves experiencing fluctuations in profits over time (such as those dealing with seasonality in their business.
9. SHORT-TERM LINE OF CREDIT / WORKING CAPITAL LOANS
LET'S NOT FORGET GOVERNMENT LOANS VIA THE CANADA SMALL BUSINESS FINANCING PROGRAM
The Industry Canada Small Business Financing Program for small business loans assists the little guy.
This term loan is a bank business loan available to help small businesses succeed in a tough economy by providing them with financial assistance for any needed business needs.
The SBL loans program works with financial institutions such as Canadian banks and credit unions to provide the funding necessary so they don’t need to shoulder all responsibility themselves.
Loan eligibility is determined by specific guidelines depending on the type of business you run and other factors like credit score and down payment; however, there are some basic requirements regardless: your company must have revenues under 10 million dollars to apply.
Let the 7 Park Avenue Financial team walk you through the actual loan applications and benefits of the program, including a lower interest rate than you might expect!
The SBL loan can be repaid without penalty.
A good personal credit score and business experience are required for government loans or any traditional financial institution. Don't be deterred by the application process, and let the 7 Park Avenue Financial team walk you through the process.
UNDERSTANDING THE ALTERNATIVE FINANCE DIFFERENCE
On balance, it sometimes seems that fewer people in traditional institutional financing can make credit decisions. Or is it just that we don’t seem to have direct access to them?
Maybe that is just us. Alternative finance lenders have to understand assets and be nimble almost 100% of the time when it comes to helping and serving the needs of small businesses.
Your company may often be asked for a business plan and cash flow projection, and at 7 Park Avenue Financial, we prepare many of those for our clients.
ASSET-BASED ALTERNATIVE FINANCING FINANCES THE BALANCE SHEET
Financing alternatives and loans from non-traditional lenders typically revolve around the balance sheet. If you have assets that can be valued and generate cash, they can be financed by the alternative lender.
Naturally, not every asset on the balance sheet can be properly financed.
Goodwill is a good example. It's also important to match the right amount of alternative financing with your asset category, whether it be current assets that are monetized daily for cash flow or longer-term fixed assets that require specific lease financing or bridge loan strategies.
Is Alternative Financing Safe?
Alternative financing can be a safe and viable option for businesses and individuals, but it’s essential to approach it cautiously.
As with any financial decision, thorough research and understanding of the terms and conditions are crucial. Unlike traditional financial institutions, alternative lenders may have different requirements and regulations, making working with reputable and licensed lenders vital.
How to Find Safe Alternative Financing Options
To ensure you find safe and reliable alternative financing options, follow these steps:
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Research the Lender: Look for previous customer reviews, ratings, and testimonials. Verify if the lender is licensed and regulated by the relevant authorities.
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Understand the Terms and Conditions: Carefully review the loan agreement, including the interest rate, repayment terms, and any associated fees, to ensure you fully understand what you’re agreeing to.
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Assess the Risks: Consider the potential risks involved, such as borrower default or market fluctuations. Weigh these risks against the benefits to make an informed decision.
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Compare Options: Shop around and compare different alternative financing options to find the best fit for your needs. Look at various lenders and financing methods to ensure you get the best deal.
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Seek Professional Advice: Consult with a financial advisor or accountant to ensure you make an informed decision. Professional guidance can help you navigate the complexities of alternative financing and choose the best option for your business.
Following these steps, you can find safe and reliable alternative financing options that meet your needs and help you achieve your financial goals. Remember, due diligence is key to ensuring the safety and success of your financing endeavours.
Three uncommon takes on alternative financing for business:
- Alternative financing can serve as a strategic tool for rapid market expansion, allowing businesses to capitalize on time-sensitive opportunities faster than competitors relying on traditional funding.
- Some alternative financing methods can act as market validation, providing valuable feedback on business concepts and product viability.
- Alternative financing options may foster innovation by encouraging businesses to think creatively about their revenue models and operational efficiency.
KEY TAKEAWAYS
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Diverse funding sources: Alternative financing taps into a wide range of non-traditional lenders and investors.
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Repayment flexibility: Many alternative financing options offer customized repayment terms based on business performance.
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Rapid approval process: Quick access to capital is a hallmark of numerous alternative financing solutions.
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Innovative credit assessment: Alternative lenders often use advanced algorithms and data analysis to evaluate creditworthiness.
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Sector-specific solutions: Certain alternative financing methods cater to specific industries or business models.
CONCLUSION - TYPES OF ALTERNATIVE FINANCE FOR SMALL BUSINESS
Small businesses continue to face financial challenges. Whether it's a pandemic or economic factor, accessing business funding is challenging!
Funding your business can be a complicated but necessary process. With so many different options, how do you decide what works?
Depending on your company's current state, this timeline will determine whether it needs debt-based lending or raising money through other means, such as monetizing assets.
Our bottom line today is simply that you might be surprised at how much real ' glitter ' is shining in funding options via alternative financing solutions.
Companies considering alternative finance loans should do their homework as with any business decision. Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor.
FAQ
What is alternative lending?
Alternative lenders are a source of lending outside traditional banks in Canada.
They offer loans ranging from short-term loans to longer-term business credit lines for larger sums than many small and medium-sized businesses could obtain from banks.
How does alternative financing differ from traditional bank loans?
Alternative financing, versus traditional financing options, offers more flexible terms and faster approval processes and often considers factors beyond credit scores, making it accessible to a broader range of businesses.
What types of alternative financing options are available for my business?
Standard options include invoice factoring, merchant cash advances, peer-to-peer lending, equipment leasing, venture capital, and revenue-based financing, each catering to different business needs.
Can alternative financing help my business if I have less-than-perfect credit?
Many alternative lenders use innovative credit assessment methods, considering factors like cash flow and business performance, which can benefit businesses with less-than-ideal credit histories.
How quickly can I access funds through alternative financing methods?
Depending on the type of financing, funds can be available in as little as 24-48 hours, significantly faster than traditional bank loans.
What are the potential benefits of using alternative financing for my business?
Alternative financing can provide faster access to capital, more flexible repayment terms, and the ability to fund specific business needs without diluting ownership or requiring extensive collateral.
Are alternative financing options regulated in Canada?
While some are regulated, others may fall outside traditional financial regulations. It's essential to research and understand the terms and conditions of any financing agreement.
How do I choose the right alternative financing option for my business?
Consider your specific funding needs, repayment ability, and business goals. Compare different options, their terms, and their potential impact on your business before making a decision.
Will using alternative financing affect my ability to get traditional loans in the future?
Using alternative financing responsibly can potentially improve your business's financial profile, making qualifying for traditional loans in the future easier.
Is alternative financing more expensive than traditional bank loans?
While some alternative financing options may have higher costs, they often provide value through speed, flexibility, and accessibility that can outweigh the additional expense for many businesses.
What factors should I consider when evaluating different alternative financing options?
Consider the cost of capital, repayment terms, funding speed, eligibility requirements, and potential impact on cash flow and business operations.
How can alternative financing help my business navigate seasonal fluctuations or unexpected opportunities?
Alternative financing often provides more flexible and rapid funding solutions, allowing businesses to adapt to seasonal demands or capitalize on time-sensitive opportunities quickly.
What role does technology play in the alternative financing landscape?
Technology enables faster credit decisions, streamlined application processes, and innovative funding models, making alternative financing more accessible and efficient for businesses.
What is Crowdfunding?
Crowdfunding is an alternative financing method where businesses raise funds from a large network of potential investors through online platforms. It offers several benefits:
- Access to a wide pool of investors
- Reduced need for extensive credit checks or collateral
- Opportunity to validate business ideas or products
- Serves as a marketing tool, generating buzz and community support
- Flexible and accessible option for businesses seeking growth and innovation
What is Peer-to-Peer (P2P) Lending?
P2P lending connects borrowers directly with individual lenders through online platforms, bypassing traditional financial institutions. Key features include:
- Potential for lower interest rates due to reduced overhead costs
- Faster and simpler application process
- Quick access to funds
- Higher potential returns for lenders compared to traditional savings accounts
- Opportunity for lenders to diversify investment portfolios
- More efficient and accessible financial ecosystem, leveraging technology
- Carries some risks, such as borrower default and varying levels of regulatory oversight
